Life Insurance and Annuities Contracts
Cash value in insurance and annuities are generally protected from creditors' claims in most states. In Florida, for instance, life insurance cash value all annuities are 100 percent protected and while a Florida resident is alive, the cash value of any insurance policy he owns on his life or on other Florida residents is exempt from creditor claims.
One important thing to note is that in some states, statutes protect the cash value in insurance against the insured creditors; however, the policy beneficiary(s') creditors may still have access to that asset.
An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals. Annuities typically allow for tax-deferred growth of earning and may include death benefits; however early withdrawal of an Annuity may trigger a penalty.
Annuities can come in three ways; fixed, indexed and variable. In a fixed annuity, the insurance company agrees to pay a specified rate of interest during the time your annuity is growing. In an indexed annuities promise returns based on changes in an index (such as a stock price index). In a variable annuity, you can choose to invest your purchase payments from among a range of different investment options – usually mutual funds. Your return will be dependent on how your investments perform.
The last important aspect of annuities to note is that the Securities Exchange Commission (SEC) regulates some annuities. For instance, variable annuities are always regulated where indexed may or may not be (but are usually registered with the SEC regardless). Fixed annuities are not regulated by the SEC.
Insurance, in general, is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. Specifically here, life insurance insures the risk of a loss of life and its cash value is exempt from creditor judgment.
Yes, You Can Lose Everything!
You may think that your wealth is safe and that you don't need protection. But don't delude yourself and accept reality — for every 60 minutes you spend making money, spend 60 seconds thinking about how to protect it!