Annuities can provide a great source of income for those in retirement. The way annuities work is that a consumer will make an investment, which will then be invested in and grow over an accumulation period. Once this timeframe is over, the annuity then will be paid out in fragments. This can be done in monthly payment or even a lump sum, depends on the type of annuity. Many life insurance agents sell annuities as a way to provide financial stability for a client's future. But before you sell an annuity to a consumer, know that there are many options to choose from.
Standard
Fixed annuities are one of the most common types of investments clients can sign up for. An insurance carrier will make a set payment amount during the duration of the annuity. This type of annuity is invested in corporate bonds and government securities. The provider will continue making payments until the accumulation period is over with. This is a standard option that is better for those who need to save over a longer period. But there are other options for those that want to see a quicker investment over a shorter length of time.
Quicker return
If your client wants to go for the high-risk, high-reward route, you may want to explain to them what variable annuities are. This type of insurance contract is tied to the stock market, so the annuity will reflect how the stock market does. An important point to make to your clients is that during the accumulation period, investments are made to sub-accounts. This is very similar to a portfolio investment and can show the client their level of risk.
Payout options
Once you have explained the different types of annuities that are available, it is time to decide what the payout option will be. An immediate payment is an option for investors who want a quick return. After a client pays the premium, they will start receiving their payment a year after taking up the policy. If your client wants to build their product, deferred annuities might be best for them. This payment will grow thanks to the interest over time. This is a good option for those who want to have a income source come retirement.
Annuities can be a great asset for a client's future, but make sure they know all the facts before signing up.
