Certificate Of Deposit Annuity
What Does Certificate Of Deposit Annuity Mean?
A Certificate of Deposit Annuity (CD Annuity) is a financial instrument that combines features of both a traditional Certificate of Deposit (CD) and an annuity. Life insurance policyholders can use CD annuities as a means of generating income or preparing for retirement.
Insuranceopedia Explains Certificate Of Deposit Annuity
CD annuities are similar to Certificates of Deposit in that they impose penalties for early cancellation and offer a fixed interest rate for a specified period. However, they also share characteristics with annuities, as they provide fixed payments to the policyholder after they have made contributions for a certain duration. Unlike bank CDs, CD annuities are issued by life insurance companies rather than banks, so they are not FDIC-insured. The trade-off is that interest in a CD annuity grows tax-deferred until withdrawal.
