In the United States, an annuity contract is a an investment product that is relatively-low risk and contractually executed whereby the insured, who is usually an individual, pays a life insurance firm a lump-sum premium at the beginning of the contract.

These types of contracts are regulated by the Internal Revenue Code and controlled by state governments. Variable annuities have similar characteristics to both investment products and life insurance. In the United States, life insurance companies are the only entities that can issue annuity insurance, but private annuity contracts can be arranged between donors and non-profits to decrease taxes.

Insurance companies in the United States are regulated by state governments, so options or contracts that may be applicable in one state may not be in another. However, the federal tax system is kept in check by the Internal Revenue Code. The sale of variable annuities is presided over by FINRA (the Financial Industry Regulatory Authority, which is the largest non-government regular for all security firms conducting business in the United States). Variable annuities are in turn overseen by the Securities and Exchange Commission.

There are two likely phases for an annuity. One is where the client deposits and accumulates money into an account (deferral phase), and the other is where the client receives payments for some duration of time (income or annuity phase). In the course of this latter phase, the insurance firm makes income payments that can be scheduled for a stated period of time or until the death of the client’s annuitants cited in the contract.

Annuitization over a lifetime may come with a death benefit agreement over a certain amount of time, like 10 years. Annual contracts that have a deferral phase always come with an annuity phase and are referred to as deferred annuities. An annuity contract may be structured so that it only includes the annuity phase, which is called an immediate annuity. It is important to note that this is not always the case.

> Learn about the annuity advisor services offered by Assured Retirement Group.

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What is an Annuity in the United States?
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