Life Insurance Quote Reviews

As with life insurance proper, the different experience of all individuals is encompassed within the mortality statistics. While in ordinary life insurance “the burdens of the few are borne by the many”, in annuities almost the opposite is the case, for it is the losses of the few (the minority who die soon after taking out their annuities) that provide for the propensity of many annuitants to live longer than the average.

The investments in which the company invests its annuity fund are often Government securities or other fixed interest investments such as local authority loans. The reason these are normally chosen is that they enable the company to obtain the highest possible secure income on its annuitants’ money and also to match the income to the expected periods for which it is to be paid.

Annuities used to be a favoured investment for retired people who had saved up money throughout their working life and wanted to obtain an income from it higher than that available from deposits or stock market or other risky investments.

The return from the annuity is higher because of two factors: first, each annual payment consists of an element of both interest and capital, and, secondly, the yield from the underlying investments is usually the highest income safely obtainable on any invest­ment. Only the interest portion of each annual payment is taxable, so that the net annual return from an annuity will far exceed that obtainable, say, on equities.

However, the steady increase in inflation since 1960 has had a very severe impact on those who purchased annuities on retirement at the start of that decade. The fixed annual payment of annuitants has been eroded in spending-power terms and in some cases hardship has resulted. The dangers of contracting for a fixed income in inflationary times should not be forgotten when considering an annuity, but it may still provide the best net return when compared with other types of investment. There are several different types of annuity matched to particular needs which are considered below.

Tags: life insurance, life insurance cover, life insurance quote, term life insurance

This entry was posted on Friday, November 21st, 2008 at 12:34 pm and is filed under Life Cover. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.