What role does the insurance company play regarding annuities?

The insurance company plays a crucial role in the management and distribution of annuities, primarily by guaranteeing payments and managing investments. When individuals purchase an annuity, they are entering into a contract with the insurance company, which promises to make regular payments to the annuitant, either immediately or at some point in the future. This guarantee creates a sense of security for the annuitant, as they can rely on receiving income for a specified period or even for the remainder of their life, depending on the terms of the annuity.

In addition to guaranteeing payments, the insurance company is responsible for managing the invested funds within the annuity. This involves the insurance company typically investing in a range of financial assets to ensure that it can meet its obligations to annuitants. The performance of these investments affects the returns that may be credited to the annuity holder, especially in variable annuities where the investment returns can vary based on the performance of the underlying assets.

Insurance companies do not provide tax advice specifically; while they can outline tax implications related to annuities, detailed tax advice should come from a qualified tax professional. Similarly, their investment strategies might or might not include stock market investments, as they can also invest in bonds, real estate,