Page 34 - Life Assurance

Immediate annuities are typically purchased
in a lamp sum by people near retirement.

A fixed annuity can also be purchased that
defers the income payments until some later
date. A deferred annuity provides income
payments at some future date. This type of
annuity is essentially a plane for accumulating a
sum of money prior to retirement the
accumulation period prior to retirement a death
benefits is typically paid equal to the sum of the
gross premiums paid or the cash value if higher.
At the maturity date of the contract, the
annuitant can receive the funds in a lump sum or
have them paid out under one of the settlement
options (discussed later).

2- Variable annuity:

A second type of annuity is a variable
annuity. A variable annuity pays a lifetime
income, but thee income payments vary
depending on common stock prices. The
fundamental purpose of a variable annuity is to
provide on inflation hedge by maintaining the
real purchasing power of the periodic payments
during retirement. It is based on the assumption
of a positive correlation between the cost of
living and common stock prices over the long
run.

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