An annuity is a type of insurance since there is an amount at risk. An insurer relies on the insured living long enough so that the premiums paid and interest earned will equal or exceed the policy’s death benefit with an insurance policy. With fixed annuities, the insurance company is counting on the annuitant not outliving the principal and interest.
Who Assumes The Investment Risk With a Fixed Annuity Contract?
The fixed annuity contract owner does not bear the risk of investment loss. However, with all fixed income investments, an owner is exposed to purchasing power risk that his or her purchasing power will erode over time due to inflation.