VARIABLE ANNUITY INSURANCE



The term 'variable annuity insurance' refers to a form of insurance contract that gives the client access to the investments after a certain period of time. At the end of the accumulation period - at which a certain amount of money has been paid into the contract - the insurance company then guarantees a certain repayment back to the client and this will continue at predetermined stages depending on the client manages the variable annuity insurance portfolio. They operate in a similar fashion to plain vanilla fixed annuity insurance contracts, and with some of the same characteristic features (such as specific guarantees, tax deferral options and the possibility of lifetime payouts). The difference is that with a variable annuity contract, the client can actually choose where his or her investment money is going to end up.



In other words, the amount of money that a variable annuity account pays back at these intervals depends entirely on how the money is invested (in bonds and mutual equity funds, generally speaking). Therefore, how much the subsequent income payments amount to depends entirely on the success of the individual investments. That is why is it is described as a variable annuity as opposed to a fixed annuity - because the amount that is returned will vary on each and every subsequent payout, whereas with a fixed annuity the amount paid back each time will always be the same on all occasions. Whether the variable annuity comes to less or more than a fixed annuity account would depends on how cannily the money is invested.

People can choose to invest their money in a variable annuity for all kinds of reasons. One of the most common is in order to defer recognition of taxable gains, in other words to avoid having to pay taxes the amount of money they have for a certain period of time (as long as the money is invested in the variable annuity account). Because the money grows during the time it is invested, investors do not have to pay taxes on the money until they withdraw it from the account. They can also be a legal way of protecting your money from creditors, since regardless of how much you owe, creditors are not allowed to force you to pay out from an annuity. Another reason someone might choose to take out a variable annuity account as opposed to a fixed annuity is because it is also much easier to change at least some of the investments when you have a variable annuity account, due to them having many different sub-accounts into which money can be redirected, usually at no extra cost.