Annuities and the Annuity Contract Owner

An annuity is a contract between the buyer and an insurance company. In general, the insurance company promises to do something with the buyer’s money -- like grow it or pay it out over a number of years. This page should serve as a general overview of annuities. After you understand the concept you can look into the various annuity types.

Annuities can be helpful in some situations. In general, some benefits are:

• Tax-deferred growth and compounding within the annuity contract
• Guaranteed rates of return on your dollars
• Guaranteed lifetime payments if you annuitize (in some cases you don’t even have to annuitize in order to receive this benefit)
• Other features that may be important to you. These are various bells and whistles that do very specific things

Note that the guarantees are only as strong as the insurance company that issued the annuity. In other words, if the insurance company fails, the promise is no good. I recommend mitigating this risk by using only the strongest insurance companies out there.

The contract owner is the person that owns an annuity. Note that a “person” can be an entity in this case.

Contract Owner Activities

The contract owner goes through the process of purchasing an annuity. The contract owner is generally the person who signs all the paperwork and funds an annuity contract. The contract owner agrees to the terms of an annuity contract.

Contract Owner Rights

The contract owner chooses an annuity and makes decisions on all the details – when it starts, how much money goes in, when money comes out, and so on.
The contract owner also chooses the beneficiary and the annuitant in an annuity contract. In many cases, the contract owner may choose himself/herself as the annuitant.
If the annuity offers a variety of investment terms and choices, the contract owner also makes these choices.

Contract Owner Restrictions

Of course, the contract owner can only choose from what’s available in a given annuity. Each annuity out there has different options and restrictions. Even though the contract owner gets to make choices, the contract owner may have to pay a fee or penalty for certain actions.