The Concept of Annuity Insurance
Annuity insurance is not about income, it’s about cash flow planning based on security. Annuity insurance is a financial instrument similar to fund fixing. The annuity insurance policy and premiums are fixed from the beginning of the term, you will get the income over time.
Features of Annuity Insurance
The interest rate of an annuity insurance policy cannot compare with the expected return of a fixed deposit fund, while its advantage is the safety. There are 3 main dimensions to measure the quality of a financial product: safety, liquidity and profitability. No financial product has all 3 of these characteristics, and each has its focus and irreplaceable function.
Our family need scientific financial planning and asset allocation. A steady safe insurance policy is a reliable defensive asset for family asset allocation and is the best tool for pension, education and asset inheritance.
Classification of Annuity Insurance
Traditional Annuity Insurance
The benefit is shown in the contract in the form of the account value, which is determined each year in the beginning. Therefore, traditional annuity insurance is similar to the fixed income form, which is paid 100% guaranteed.
Participating Annuity Insurance
Participating Annuity Insurance includes fixed income and dividends (not guaranteed). The fixed income part comes from annuity insurance and the benefits available are shown in the account value. The dividends depend on the distributable surplus of the insurance company in the previous fiscal year, 70% of which is to be taken out to the policyholders. The dividend depends exactly on the business performance of the insurance company, if there is no distributable surplus, the dividend will be zero.
Universal Annuity Insurance
Universal Annuity Insurance includes fixed income and universal account settlement rate. The fixed income portion comes from the annuity policy, but the actual settlement rate for the universal account is variable, although the universal policy will state the guaranteed interest rate in the contract. This means that the actual settlement rate cannot be lower than the guaranteed rate. The highest guaranteed interest rate on the market today is 3%.
Investment-linked Annuity Insurance
No guaranteed interest rate. This type of annuity insurance is not related to what is essentially insurance anymore, the investment risk is higher. Neither principal nor interest is guaranteed, it just pays out in the form of an annuity, and how much it can payout depends on the account value of the policy at the time.