An annuity is a contract between an individual and an insurance company. Once the contract is entered into, the individual becomes known as the annuitant. There are three basic types of annuities that are designed to meet different objectives. They are:
- Fixed annuity
- Variable annuity
- Combination annuity
While all three types allow the investor’s money to grow tax deferred, the type of investments made and how the money is invested varies according to the type of annuity.