What does Annuities mean?

The annuity is an income fixed or variable which usually is granted by life insurance policies, and it is a good measure for a retirement plan. It can easily be observed that this process is exactly the opposite of contracting a mortgage; here you make an investment so that you will have later benefits in the form of monthly installments, whereas with a mortgage you firstly make the payments in order to own a property for example.

The monthly installments you are eligible to receive from an annuity are always subject to how much you will invest in your insurance policy. Given the fact that life expectancy in women is much higher than in men, women will be eligible to receive a slightly smaller annuity than men. Also, above the age of 65 an individual is eligible to receive higher and higher amounts in his annuity, because life expectancy lowers as an individual ages.

When contracting a life insurance policy, there will generally be made a life expectancy estimative for the customer, which is calculated taking into consideration facts like age, sex, occupation, and most importantly health condition, and based on all these factors will annuity be calculated. Depending on the type of life insurance one contracts, some may have the stipulation that upon the death of the policyholder annuities will stop, regardless of when the death occurs in time. Other policies may guarantee annuity payments for as long as the policyholder lives, regardless of the life period. Then, there are the joint life annuities, which imply paying out a lump sum to the spouse in case the policyholder dies.