What is the difference between a fixed annuity, an equity annuity and variable annuity?
A fixed annuity earn a guaranteed rate of interest for a specific time period, such as one, three or five years. Once the guarantee period is over, a new interest rate is set for the next period. It also provides a guaranteed fixed benefit amount to the annuitant, expressed in terms of dollars per payment period. An equity indexed annuity (EIA) is fixed annuity that offers all the advantage of traditional fixed annuities plus inflation protection because it invests in the stock market. It is subject to the up and down savings of the stock market. A variable annuity shifts much of the investment risk from the insurer to the contract holder because there is no certainty and no guarantee as to its return. With a variable annuity it is the contract holder who determines how his or her premium will be invested. The return on a variable annuity will depend on how well these underlying investments programs perform. The disadvantage of a variable annuity is that its lack of guarantees has the
