If you have been lucky enough to win a personal injury case or become the beneficiary of an estate, you may just find that your payout will be in the form of an annuity. If you are unfamiliar with annuities, the first thing you will want to do is to continue reading this article. It will provide you with all the information you need to know about these financial products.
Is An Annuity A Good Option?
Deciding if you want to accept annuity payments or a check for the full amount of your winnings, settlement or payouts will be quite difficult. The first thing you must do is set down with your family to discuss your options. If you have received a large payout, you should consider choosing an annuity. There are several questions that you should ask yourself, before making your final decision.
- What type of annuity would better suit my needs?
- What insurance company should I use to buy my annuity?
- How much will it cost me in fees?
- Can I live comfortably on these payments?
Insurance companies, along with a variety of financial institutions and brokers issue annuities. When choosing one of these companies, you should conduct thorough research. Be sure to only choose a company, broker or bank with a great reputation and high rating.
When some people opt to receive a check for the full amount of their payout, they will oftentimes find that it is easy to overspend. In fact, some people will be broke after a couple of years of overspending. Annuities offer a steady flow of cash over a specified period of time. If at any time you find that the payments are not enough, you will need to learn how to sell annuity payments.
Understand The Concept Of An Annuity
The first thing that you need to know is the concept of an annuity. An annuity is basically just a contract between yourself and an insurance company. The contract will agree to cover specific goals over the course of your lifetime. In many cases some of this goal can refer to principal protection, legacy plans, long-term care, and lifetime income. While annuities are usually promoted as investments, that are anything but. In fact, an annuity can be more widely recognized as a contract of sorts. They usually get you locked in for a long period of time and if you break the rules in the slightest, you could be looking at steep repercussions.
Annuities Can Be A Risk
While it might seem like it, not all annuities offer a guaranteed return on your investment. In fact, with variable annuities your premiums are usually put into a variety of what is known as subaccounts. These subaccounts are extremely similar to mutual funds in the way that they work. Each individual subaccount with come with its own goals and objectives in mind, but there will be an additional management fee along with the insurance company’s fee.
The amount that you will make back on these accounts is really based on the performance of each subaccount. This pretty much means that the insurance company cannot guarantee you a fixed return rate, so you as the investor bear all the risk. However, you do have the option of choosing where you want your premiums to be placed, so make sure you put in the research and choose the most viable option.