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Insurance - A Plan For Your Future

Feb 3, 2008
In order to lead a livable life, you would need to balance between your investments and the money that you would require to run your daily life. This is the concern of most of the investors. Most of the investment options available today allow fund growth for your retirement, or the investment is made for a definite period of time in the future. Yet there is one type of investment which allows fund availability not only for your future, but also the present. This is what is split annuity insurance.

You set up an annuity with an insurance company by signing a contract. This offers you with cash funds on an on-going basis, or tax-deferred retirement income. Annuities are of different kinds, and they include:

* Immediate annuities.

* Tax-deferred annuities.

* Split annuities

* Charitable gift annuities.

* College gift annuities.

You are offered with different kinds of benefits for each of the annuities stated above, and the features offered by the annuities can help your personal situation in many ways. In investing in such annuities you must be of young age and looking for fund availability in the future or you are close to retirement and you would opt for immediate income.

In split annuity, you pay a single premium which is divided into two parts, one for the immediate annuity and the other for your deferred annuity. Thus your single premium is broken up into the two benefits that you will be receiving. This type of an annuity is termed as split annuity. The single premium that you pay is a combination of both the benefits. Under this annuity scheme you start to receive a steady stream of cash that is consistent and made available to you in the period of time agreed, which may be quarterly, semiannually, or annually. This is a safe transaction and is guaranteed, and does not depend upon the market conditions. Taxes on this cash that you get are about 18% of the yearly amount, and therefore it is quite minimal for any large differences.

You also receive tax benefits under the split annuity scheme, which comes out of your tax-deferred annuity portion of your policy. This allows you to earn tax-deferred growth on your earnings. The initial interest rate of return will be fixed for a fixed period of time, such as, one year or three years, after which a new period is set. With a proper planning, and with a suitable configuration of your policy, your original principal is restored after the initial time period which has been set in your policy. You will be able to do this only on the immediate portion of your annuity and not the deferred one. As soon as you take out the policy, you start on the interest rate that is prevailing at that time. In split annuity you are restricted to receive the benefit of constant stream of cash for three to 20 years. You can take out funds from your deferred payment portion of the annuity, but this has limitations. In this regard you would need to consult your insurance company to get more details.
About the Author
J Amalorpava Mary is the owner of The Insurance Direct, to find out more information on Auto Insurance, Life Insurance and much more insurance topic visit her site.
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