One of the biggest decisions to tackle before that inevitable time comes is how you want your savings to be distributed after you pass, or even while you’re still around. While many folks opt for lump-sum payout Florida life insurance policies, this route isn’t right for everyone, and some prefer the benefits offered by annuities. A Florida independent insurance agent can help you choose the right type of annuity for your needs. But first, here’s a closer look at what they’re all about.

What Is an Annuity?

An annuity is a contract between you and a life insurance company designed to cover your specific goals. Annuities are a popular option because of the amount of flexibility they afford. Premiums are required, but you can design yours to be paid either in a single lump sum up front or in a series of payments, depending on the type you get. 

Annuities can be set up to pay out at a designated time. So if a child tragically loses their parents, they can receive the payout at the time when it's needed to cover their college tuition. This kind of strategy would most likely benefit the child more than receiving the payout up front. 

After you pass, the designated beneficiary can remain on the same payment schedule you had set up, or they can change it. So the flexibility not only benefits the person paying for the annuity, but also the person they ultimately want to receive the cash in the end. Your Florida independent insurance agent can talk to you about all the different options available.

How Do I Find an Annuity that Works for Me?

When choosing an annuity, it helps to start by knowing what your goals are. You’ll need to consider things such as when you want to be able to receive your payments and what type of guarantee is important to you. However, it might help you guide your decision-making process by knowing about the types of annuities available in the first place.

There are three major types of annuities available in Florida:

• Fixed annuities: This option allows you to earn a shared interest rate on any funds you deposit into the account. Fixed annuities offer risk-free investments and the same payout amount annually. All the risk falls to the insurance company.  
  An immediate fixed annuity involves you paying one lump sum up front, which later results in you getting monthly, quarterly, or yearly payouts which continue for a certain number of years. Immediate fixed annuities are favored by those who are getting ready to retire and by retirees who want to guarantee a fixed income.  
  Deferred fixed annuities allow you to save money on a tax-deferred basis and then reap your rewards down the line. This option is common among folks who want to create a payout for themselves once they reach retirement. However, once you start getting payouts from your annuity, you’ll have to pay taxes on any earnings you’ve made.
• Variable annuities: This option allows you to make either a lump-sum payment up front or a series of payments over time. You may either receive payments immediately or at a specified date in the future. The accumulation phase of a variable annuity involves you paying money into the account, and in return you have several investment options such as money market funds, balanced funds, and international funds. There is risk involved in these investments, of course, as your eventual payouts will reflect the success (or failure) of the option you selected. You may end up with more or less money than you originally deposited during the payout phase, which can be made up of one lump sum or scheduled payments.
• Indexed annuities: This option allows you to make either one lump-sum payment up front or several payments over time, similar to variable annuities. The difference is the payouts you receive are based on a fixed rate and an index, such as the Standard & Poor’s 500 stock index. Your annuity payments will increase if the index is higher than the rate, but if the index is lower, your payment will match the minimum guaranteed rate. A max or cap is usually placed on the indexed rate of increase.

Once you understand the various types of annuities available, it may become easier to consider which option meets your specific needs. If you’re still unsure, however, your Florida independent insurance agent can help you decide what’s best for you.

Do I Need an Annuity?

No, you don’t necessarily need one. However, if you’re looking to guarantee yourself a source of income in the future, such as after retirement, you may want to seriously consider getting an annuity. Annuities allow you to receive predictable income that won’t be subject to market fluctuations, which gives them an advantage over stocks, bonds, and mutual funds. A sense of financial security and promised stability makes annuities appealing for many folks.

What Are the Benefits of Annuities?

When weighing the pros and cons of selecting an annuity versus a traditional life insurance policy, it may help to know the specific benefits of each type of annuity. Of course, not all types of annuities work for everyone, and for some folks, an annuity won’t make sense at all. But to help you make that choice, here’s a breakdown of the major benefits offered by annuities:

• Fixed annuities allow you to withdraw up to 10% annually without being slapped with a penalty. It’s also easy to transfer savings in a deferred annuity into an immediate annuity. They offer you the option to leave your savings to a family member or charity without the penalty of estate taxes too. Finally, fixed annuities offer a 30-day free-look period during which you can return the annuity for a full refund if you’re not a fan or change your mind.
• Variable annuities allow you to add a death benefit for an additional fee. Also, variable annuities allow the federal income tax on gains on the funds in the account to be deferred until those gains are paid out. Finally, in the event the market value increases before the death benefit is paid out, your beneficiaries may receive more money than you originally deposited.
• Indexed annuities allow you to withdraw up to 10% of the original amount you invested without a penalty each year. You have the option to add a death benefit with indexed annuities as well. Additionally, indexed annuities allow you to withdraw all the funds you deposited into the account without a penalty if you’re entering a nursing home.

If you have any remaining confusion about the different types of annuities available and their respective benefits or which kind is ultimately right for you, your Florida independent insurance agent can help demystify them even further.

Why Work with a Florida Independent Insurance Agent?

In order to get the protection you need and deserve, you’ll want to work with a trusted expert. And who could be better for the job than a local agent who shares your area code? Independent insurance agents act as your own personal insurance shoppers, offering you tons more options than one-policy companies. With just one call, they’ll hook you up with multiple quotes.

Florida independent insurance agents are armed with knowledge on what coverage is needed in your area, and they’ll get you set up with just enough of it — not too little, not too much. They’ll handle all the heavy lifting so you can rest assured you’ll be set up with the right coverage at the right price.

They’re not just there at the beginning either. If disaster strikes, your Florida agent will be there to help walk you through the claims process and make sure you’re getting the benefits you're entitled to. Now that’s thinking ahead.