How Does an Annuity Contract Work?

Signing an annuity contract will be a necessary part of purchasing an annuity for your retirement planning. Here are the basics of an annuity contract.

Annuity Contract

An annuity contract is the official document that you will have to sign in order to start an annuity with an insurance provider. This contract spells out all of the obligations of each party. This is a legally binding agreement designed to protect both parties involved.

What Is Included

An annuity contract will include a lot of specific information about your annuity. The contract will cover the length of the annuity itself. It will also discuss what type of annuity it is. For example, it could be a fixed annuity, variable annuity or equity indexed annuity. If it is a fixed annuity, the contract will also discuss the interest rate that is guaranteed and the amount of time that the guarantee lasts.

An annuity contract also includes information about the death benefit of the annuity. All annuities have differences when it comes to how the money is handled when the individual that purchased the annuity passes away. This document will outline exactly what will happen and who will get the money.

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