Definition

• An insurance annuity is a contract between the owner (you) and the insurance company. You can make one complete payment or a series of payments. The insurance company agrees to make periodic payments to you, commencing immediately or on a future date.
  
  

Earnings

• Insurance annuities generally have earnings on which you can defer taxes. Annuities can also include a death benefit, granting your beneficiary a guaranteed minimum payment.
  
  

Fixed Annuities

• With a fixed annuity, the insurance company guarantees that your account will earn the least possible amount of interest as it grows. Your periodic payments might continue for a definite term, such as 25 years, or indefinitely, such as your lifetime.
  
  

Variable Annuities

• With a variable annuity, you can choose among different investment, normally mutual funds. The rate of return on your purchase payments, and the amount of periodic payments you receive, depend on the performance of the investments you selected.
  
  

Regulation

• The Securities and Exchange Commissions does not regulate fixed annuities because the return is not linked to equity markets. The SEC does regulate variable annuities.