Life Insurance - Annuities

Annuities

An annuity is a contract with an insurance company whereby the insured pays an initial premium or premiums into a tax-deferred account, which pays out a sum at pre-determined intervals. There are two periods: the accumulation (when payments are paid into the account) and the annuitization (when the insurance company pays out). IRS rules restrict how money can be withdrawn from an annuity. Distributions may be taxable and/or penalized.