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Types of Fixed Annuities

The basic types of deferred fixed annuities can be broken down into the following categories. They are:

  • Book value deferred annuity products earn a fixed rate for a guaranteed period. The surrender value is based on the annuity’s purchase value plus a credited interest, net of any charges. Book value products are the predominant fixed annuity type sold in banks.
  • Market value adjusted annuities are similar to book value deferred annuities but the surrender value is subject to a market value adjustment based on interest rate changes.
  • Index annuities guarantee that a certain rate of interest will be credited to premiums paid but also provide additional credited amount based on the performance of a specified market index (such as the S&P 500®).

Types of immediate (fixed income) annuities:

  • Structured settlement annuities are used to provide ongoing payments to an injured party in a lawsuit.
  • Single premium immediate annuities (SPIAs) are usually purchased with a lump sum and payments begin immediately (usually within 30 days) or within one year after the annuity is purchased.

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