There are many different types of annuities. For each type there is a different rate of return or payment value. For example, an indexed annuity has a fixed rate of return on the amount of money invested. If the stock market goes down the insurance company will pay the guaranteed funds for the annuitant.

A fixed annuity is the least expensive of the annuities, with the investment value remaining the same forever. This type of annuity can provide the most benefit to people who have the longest life expectancy. An example of this type of annuity is an indexed annuity that pays fixed payments every month and has a guaranteed annual rate.

Income annuities can be either fixed or variable. The difference between a fixed annuity and a variable annuity is that with a fixed annuity the interest rate is locked in, usually by having an initial amount that must be paid to the insurer prior to the annuitant’s account being invested in. The amount the insurance company is willing to pay depends on the value of the stock or bond and the risk of the stock or bond. A variable annuity allows the annuitant to change the interest rate as needed.

The payment value of an indexed annuity is the amount of money that is paid every month at the beginning of the annuitant’s fixed annuity annuitant’s account is invested in. The value of the annuitant’s account is calculated by multiplying the value of the insurance company’s accounts and determining the interest rate. In other words, an indexed annuity is equal to the present value of the future payments and there is a fixed interest rate that is determined at the time the annuitant takes out the insurance annuity.

A variable annuity allows the annuitant to change the interest rate as needed and the payment value of the account is determined by using the rate of return on the insurance company’s investments. This annuity has a greater chance of increasing in value over time than an indexed annuity because the annuitant is not locked into a fixed rate for the duration of the policy. Another important consideration when determining the payment value of an indexed annuity is the tax benefits that will accrue to the annuitant, since the insurance company must pay taxes on the value of the annuitant’s account.

When looking for an annuity to invest in for your financial security, you can choose a lump sum or monthly income annuities. Many annuities provide some type of guarantee that if the stock market goes down or your portfolio suffers a certain percentage it will automatically reinvest the guaranteed funds into another annuity to pay you for your future expenses. These types of annuities are considered to be a good way to diversify your investments, while also providing a long term payment value that is assured for the foreseeable future.