Deferred Annuity
What Does Deferred Annuity Mean?
A deferred annuity is an annuity in which the policyholder receives payments at a specified future date after making contributions over several years. In the context of insurance, many life insurance companies offer annuities as part of certain policies, serving as investment vehicles. These annuities can be used to supplement retirement income. Deferred contracts are one of the main types of annuities, along with immediate annuities that begin payouts right after the purchase.
Insuranceopedia Explains Deferred Annuity
The benefit of deferred annuities is that they can provide a reliable and scheduled source of income at a future date, which is especially advantageous for the elderly who may no longer be able to work. The downside is the requirement to make contributions over a long period during the savings phase. However, this is not a concern for individuals who purchase life insurance to plan for their future financial needs. Many life insurance companies offer annuities as one of several investment options available within their life insurance policies.
These bundled versions are usually tied to permanent life insurance products like whole life or universal life, which build cash value and keep coverage active for the policyholder’s lifetime. Because you may not begin drawing on a deferred annuity for twenty or thirty years, the financial strength of the issuer matters, which is one reason buyers compare the top-rated life insurance companies before signing a contract.
