An AIG annuity is an annuity policy issued by the insurance company AIG. AIG provides insurance services in North America and around the world. When you purchase an annuity from AIG, or if you have an annuity issued by AIG, you should understand how the product works. AIG offers three different types of annuities.
AIG offers a fixed annuity policy that provides a guaranteed rate of return to you. The fixed annuity invests in bonds that pay a fixed interest rate. Because of this, the company can guarantee a fixed rate to you. You won't lose any money when investing in this fixed annuity, and the policy accumulates interest over time. When you retire, the annuity may be converted to a guaranteed income stream, or kept as a savings for you to draw from as you need it.
An indexed annuity from AIG allows you to track one of several equity indexes and earn interest based on the upward movement of that index. The upward movement of the stock market is promised without any loss of principal or earned interest, because AIG uses bonds and index call options to achieve the investment returns. Instead of investing directly in the stock market, AIG uses the interest generated from the bond investment to invest in an index call option. As the underlying stock index increases in value, the call option's value increases. The insurer then sells the option and credits the policy with the gains. If the option loses money, or expires worthless, the bonds secure the principal in your annuity. Like the fixed annuity, this annuity may be converted to a guaranteed income, or kept as emergency savings.
AIG offers a variable annuity. Unlike the fixed annuity and indexed annuity, the variable annuity offers no guarantees. Instead, you invest in mutual funds. The rate of return and your total savings accumulation is entirely dependent on the performance of the funds in the annuity. If the funds perform well, you may outperform the returns of the fixed or indexed annuities. Like the fixed annuity and indexed annuity, you may convert this annuity at retirement.
When choosing which annuity to purchase from AIG, consider your investment goals. A fixed annuity is primarily for those who want to maximize predictability and consistency of returns. An indexed annuity is for those looking to get more than what is possible in a fixed annuity, but do not want to risk their investment principal or earned interest. A variable annuity is best for those who want full exposure to the market and higher potential earnings than a fixed or indexed annuity can offer.
- "Businessweek"; Variable-Annuity Sales Rise 11% as Prudential, AIG Post Gains; Inyoung Hwang; 2010
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007