Fixed Income

What Does Fixed Income Mean?

A fixed income is an income paid at regular intervals without requiring additional work from the recipient. Typically, fixed incomes are generated through investments or other financial instruments that mature after a certain period. In the context of insurance, certain types of life insurance offer options to generate a fixed income once premium payments have been made for a sufficient length of time. An annuity is another insurance product designed for this. You pay the insurer a lump sum or a series of premiums, and in return, they pay you regular income for a set number of years or for life.

Insuranceopedia Explains Fixed Income

Many elderly people rely on fixed incomes, with social security payments and pensions serving as two primary sources. In the case of insurance, universal and whole life policies often allow policyholders to invest money accumulated from their policy’s interest over time. These investments can enhance the cash value of the policies and may later be withdrawn as a fixed income. How quickly that cash value builds varies by policy type, and some life insurance policies generate immediate cash value while others take several years to accrue any. Investments in stocks that appreciate in value or pay dividends are two potential avenues for increasing the cash value of policy investments.