Each annuity category approaches growth, income, market exposure, and access differently. Start with the fundamentals, then compare contract details with an appropriately licensed financial professional.
Six common categories
Annuities are insurance contracts, but they are not all designed for the same job. The details below are general education—not a recommendation for any particular product.
A fixed annuity credits interest at a rate declared by the insurer for a stated period. It is often considered by people seeking predictable accumulation without direct stock-market exposure.
Interest is determined in part by the performance of a market index using a contract formula. Caps, participation rates, spreads, and crediting methods can limit credited interest. You do not invest directly in the index.
Contract value is allocated among investment options, commonly called subaccounts, and can rise or fall with market performance. Variable annuities may offer optional income or death-benefit features for additional cost.
A RILA links returns to an index while defining a level of downside protection through a buffer or floor. Losses can occur, including losses beyond the protected amount, and upside is typically limited by contract terms.
A single-premium immediate annuity generally converts a lump sum into payments beginning soon after purchase. Options may include life-only income, joint income, or a guaranteed payment period.
A deferred income annuity is designed to begin scheduled income at a future date. It may be used to address longevity risk by creating income later in retirement.
At-a-glance comparison
This table is a simplified starting point. Actual benefits, restrictions, fees, and availability are defined by each insurer's contract and may vary by state.
| Type | Main objective | Market-loss exposure | Income timing | Key tradeoff |
|---|---|---|---|---|
| Fixed | Predictable accumulation | No direct market exposure | Usually later or optional | Rate and liquidity limits |
| Fixed Indexed | Protected, index-linked growth potential | No direct index loss, subject to contract | Usually later or optional | Crediting limits and complexity |
| Variable | Market-based growth potential | Yes | Optional or later | Investment risk and fees |
| RILA | Index-linked return with defined protection | Yes, beyond buffer/floor terms | Optional or later | Limited upside and possible loss |
| Immediate Income | Income beginning soon | Not based on ongoing market value | Typically within one year | Limited liquidity |
| Deferred Income | Income beginning in the future | Not based on ongoing market value | Future selected date | Limited access before income begins |
What deserves comparison
Product names alone do not tell the full story. A thoughtful comparison should consider the contract as a whole.