Immediate Fixed Annuities To Fund Insurance Premiums

Immediate fixed annuities can be a quite useful financial planning tool if used correctly. Granted, annuity products get a bad rap from opponents of the product (especially variable annuities), but many of the objections to this type of insurance contract can be overcome with understanding and creative planning.

Introducing The Immediate Fixed Annuity

An immediate annuity is designed to provide the annuity owner and her designated beneficiary fixed income payments for a period of time. The insurance company requires a lump-sum premium payment into the annuity, and then establishes guidelines as the size, frequency, and duration of the contract. The account owner has the option of assigning their own beneficiaries, and frequently name either themselves or their spouse as the designated person.

Most of the objections to fixed annuities deal with their irrevocable nature. If you determine that you need your money sooner than the designated payment schedule, probably won’t be able to get your money, or at the very least be forced to pay steep surrender fees (most immediate annuities don’t even allow this). Recent years have seen this type of fixed annuity contract being oversold to the wrong people.

An Interesting Idea: Using An Immediate Annuity To Fund Insurance Premiums

Once you understand both how the product functions, and the disadvantages that you may face, you can begin to evaluate ways in which the annuity could be beneficial to you. A common use for immediate annuity contracts is funding of insurance premiums. Annuitizing a lump-sum of money can allow the annuity owner to establish a stream of income for a specific period of time. Correspondingly, premium payments into an insurance policy are usually a consistent and predictable rate. When properly designed, an annuity can be a reasonable way to take care of premium payments, particularly ones that are designed to continue for the lifetime of the individual.

Before you implement any sort of plan involving your financial future, you should carefully evaluate and understand all of the moving pieces. Tax consequences, penalties, fees, and other variables may make a big difference in the feasibility of your action plan. If you are unsure of your decision, consult a competent financial advisor.