Annuity Contract

Loading the player...

What is an 'Annuity Contract'

An annuity contract is the written agreement between an insurance company and a customer outlining each party's obligations in an annuity coverage agreement. This document will include the specific details of the contract, such as the structure of the annuity (variable or fixed), any penalties for early withdrawal, spousal provisions such as a survivor clause and rate of spousal coverage, and more.

BREAKING DOWN 'Annuity Contract'

An annuity contract is one of the three accounts that can exist under a 403(b) plan. These 403(b) annuity contract plans are also known as "tax-sheltered annuities" or "tax-deferred annuities". An annuity contract is beneficial to the individual investor in the sense that it legally binds the insurance company to provide a guaranteed periodic payment to the annuitant once the annuitant reaches retirement and requests commencement of payments. Essentially, it guarantees risk-free retirement income.

RELATED TERMS
  1. Indexed Annuity

    A special class of annuities that yields returns on your contributions ...
  2. Valuation Period

    The time between the end of the business day of the first business ...
  3. Mortality And Expense Risk Charge

    A variable annuity fee included in certain annuity or insurance ...
  4. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
  5. Deferred Annuity

    A type of annuity contract that delays payments of income, installments ...
  6. Whole Life Annuity Due

    A financial product sold by insurance companies that requires ...
Related Articles
  1. Financial Advisor

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  2. Retirement

    How a Fixed Annuity Works After Retirement

    These popular investments can provide a steady stream of income during your retirement years. Here are the details.
  3. Financial Advisor

    Annuities and Baby Boomers: The Pros and Cons

    The pros and cons of annuities that Baby Boomers seeking retirement income need to know.
  4. Markets

    Introduction To Annuities: Advantages And Disadvantages

    In the last section, we explored the phases of annuities and how contributions are made to them and distributions made from them. This section covers the advantages and disadvantages of annuities ...
  5. Retirement

    Buying Annuities in a Low Interest Rate World

    Learn if buying an annuity makes sense in a low interest rate environment. Also discover the different types of annuities and how interest rates affect them.
  6. ETFs & Mutual Funds

    Annuities

    What annuities are: Insurance products that provide a source of monthly, quarterly, annual or lump sum income during retirement. Pros: Tax-deferred growth of earnings; no annual contribution ...
  7. Retirement

    Annuities: How To Find The Right One For You

    Fixed, variable and indexed annuities offer different features. Find out which one fits your needs.
  8. Retirement

    Guaranteed Retirement Income In Any Market

    By laddering annuities, you can be sure you'll have income no matter what the market does.
  9. Retirement

    Who Benefits From Retirement Annuities

    Annuities guarantee some degree of fixed income in retirement. But is the security worth the fees and less favorable tax treatment? How to decide.
  10. Investing

    Annuities: The Good, Bad and the Ugly

    Annuities suffer from a few perception problems. This primer that covers the good, the bad and the ugly of annuities.
RELATED FAQS
  1. What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ... Read Answer >>
  2. What type of investor should consider annuities?

    Learn about the features and benefits of annuities and when to consider one. Investors seeking to secure income for retirement ... Read Answer >>
  3. Should I pull my money out of an annuity if the insurance company is having financial ...

    If an insurance company is having financial problems, you don't necessarily have to pull your money out of the annuity. Even ... Read Answer >>
  4. For what types of financial instruments would I want to calculate the present value ...

    Learn about the types of financial instruments the present value of an annuity calculation is most useful for, including ... Read Answer >>
  5. How safe are variable annuities?

    Discover more about variable annuities, what they offer individuals entering retirement and what forms of protection are ... Read Answer >>
  6. What is an annuity?

    An annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center