A key question that comes to the mind of every person interested to invest in annuities is whether the cost of the coverage for annuities is justified for the benefits that are received. It is tough to answer this. One has to understand that with the capital you invest, insurance companies shoulder the risk and put it into the market, derive profit, and then pay you back a part of it in terms of your personal gains. In the process, your gains sometimes stand to be fixed or linked to the performance of your money in some equity. So it is your choice how much of the risk you are prepared to share with the annuity company. What is good for you is that you have the option to derive a fixed guaranteed return, irrespective of the performance of annuity. Hence, it is important that you make enough annuity comparisons and calculations before finalizing your annuity investment.

To summarize, an annuity is basically a type of investment vehicle sold primarily by insurance companies. In simple terms, every annuity has two basic characteristics based on whether the payout is immediate or deferred, and whether the returns are fixed (guaranteed) or variable. A third type is also crucial these days, known as equity-indexed annuities, where the returns are a mix of the previous two types. A brief comparison of these three types is presented here for a neutral understanding of each.

The basic principle of a fixed annuity is that in exchange of your investment the annuity company promises to pay you a fixed monthly amount for a certain period of time. For a single premium immediate annuity (SPIA), the payments begin immediately, whereas in the case of a single premium deferred annuity (SPDA), the payments start after a period of time, for example after your retirement. Fixed annuities are the safest, most popular, and reliable investments in the field of annuities.

A variable annuity invests your money in stocks or bonds of other industries, and it has no specific programmed rate of return. It offers a possibly higher rate of return compared to a fixed annuity, but the rate is not guaranteed. Hence, it comes with the risk of zero or under performance, thereby giving you very low or no returns if the stocks or bonds fail to perform. It is because of your participating in the risk, you get more returns when the stocks perform well. However, there are other loopholes attached beyond the risk factor.

Equity-indexed annuities are perhaps a strong choice now, based on market observations over time. They are a combination of the above two types and ensure a fixed return to you with certain parts of your return being linked to performance. In this manner, you do not loose your basic return value and still manage to gain from high performing industrial sectors.

Annuity comparisons are endless in terms of learning as the market constantly provides new options and calculations. However, with this overview, you can place you interest area clearly and increase your research. To learn more about comparative annuity schemes, visit and spend some time at the AnnuityLibrary.com. We hope you find the right answers in time. Call us at 1-800-998-4056 or write to us for detailed queries and we shall be happy to answer.