Funding Agreement

Updated: 29 February 2024

What Does Funding Agreement Mean?

A funding agreement is an investment vehicle in which a person pays a lump sum to the seller in exchange for a fixed return. Funding agreements are typically viewed as low risk, which is why they are often purchased by pensions, mutual funds, and other similar entities.

Insuranceopedia Explains Funding Agreement

Funding agreements are essentially a way for investors to make money without exposing themselves to a large amount of risk. They are somewhat similar to CDs and annuities. However, because funding agreements are often low-risk and are designed to act as a steady and safe investment, they tend to generate only modest returns on investment. For this reason, they are often used to preserve wealth rather than to attempt to grow it.

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