Setting Your Peace of Mind: Guaranteed Annuity

A guarantee, in its financial context, is something which comforts investors. Most of the time, insurance companies offer a guaranteed annuity amongst their products. Such option is valuable in many aspects to policyholders. If it has been neglected by many financial institutions in the past, then you can be sure that it is indeed one of the biggest factors that they have given importance to nowadays.

A guaranteed annuity promises to convert your accumulated funds to a life annuity at a permanent rate. If it so happens that the guaranteed rate proves to be more beneficial to the investor compared to the prevailing rates in the market, then the insurance company from which you have purchased your guaranteed annuity will have to make up the difference.

A guaranteed is very common in a lot of US tax sheltered insurance products and it is indeed very popular in the United Kingdom back in the 70's and 80's when long-term interest rates are high. Because the insurance companies assumed that the interest rates would remain high, they thought that the guarantees they have made will never be put to use. Alas, in the 90's, the interest rates tumble and the guarantees became all the more precious.

There are two other factors which affected the cost of a guaranteed annuity. One is that the resilient stock market performances influence the guaranteed rates that will apply; and second, the mortality assumption implied in the guarantee was not able to foresee the improvement in the investors' lifespan. True enough, it is a double edge sword for both the investors and the insurers.

A guaranteed annuity, from the word itself, pledges to make payments for a minimum period, even in the unfortunate event that the annuitant dies during the payout phase. The disbursed premium may be collected by the beneficiary indicated by the annuitant.

If you are interested in having a guaranteed annuity, it may have a relatively small additional cost than the normal annuity policies you might be presented with. This means that you can indicate a minimum guaranteed period in your annuity policy. It can be 5, 10, 15 or maybe 20 years. In the untoward event that you die, your insurer will continue to pay for the remainder of the specified period to your beneficiary. However, this is not to say that you will only enjoy guaranteed periods upon bereavement. Of course, if your health permits it, you will surely be able to receive the guaranteed income for life.

Everybody wants to enjoy the fruits of their investments. But surely, there are things that are no longer in your control; and this includes your lifespan. If a guaranteed period is something that will make you at ease with the annuity investment that you have made, then by all means, incorporate it and protect your investment.