Premium refers to the money you pay to the insurance company to purchase and fund your annuity contract. The premium structure varies by annuity type and significantly affects how your annuity grows and what options you have.
Types of premium structures:
Single Premium
- One lump-sum payment at contract inception
- Common for rollovers and large investments
- Immediate annuities require single premiums
- Many fixed indexed annuities are single premium
Flexible Premium
- Multiple payments over time
- Set your own contribution schedule
- Subject to minimum payment requirements
- Some contracts have maximum premium limits
Premium sources:
- Cash from savings or investments
- 401(k) or 403(b) rollovers
- IRA transfers or contributions
- Pension lump-sum distributions
- Inheritance or settlement proceeds
- Proceeds from home sale
Minimum and maximum premiums:
- Most annuities have minimum premium requirements ($5,000 to $25,000 is common)
- Some contracts have maximum premium limits
- Additional premiums may be accepted during a "window" period
- Qualified annuities are subject to IRA/401(k) contribution limits
For Ocala residents considering an annuity, understanding premium options helps you determine how much to allocate and which type of annuity best fits your funding situation.
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