Sometimes, you feel like the life insurance industry just makes things up so that they can be as complex as possible. You walk into your insurance agent’s office hoping to buy a simple term life insurance policy to give you a little peace of mind. You want to be sure that your family will be taken care of and not have to face financial hardship if something horrible should happen to you. You don’t want to sit for hours while an agent drones on about variable annuity life insurance.

So, what can you do? Well, you can just blow him off, to be sure. Still, it will nag you for a while afterward. “What if variable annuity life insurance was right for me and I refused to listen?!?”

OK, so you’re not probably likely to worry. Heck, your only thought after walking out of your insurance agent’s office is probably, “Thank God that is over!” At least, that’s the only thought I’ve had after walking out of my agent’s office.

At any rate, here’s the skinny on what he’s trying to sell you:

An annuity is designed to provide you with income while you’re still alive, and provide for you if you live beyond your normal life expectancy. It works like this. You put a sum of money into an annuity contract. For a certain amount of time, the money earns interest. Your access to the money during that time is limited.

Once this period is over, you have a number of options to get your money back. You can have a monthly income for a set number of months or you can have a smaller income that lasts until your death.

A variable annuity is contrasted with a fixed annuity. With a fixed annuity, your investment earns a guaranteed rate, usually topping out around 3 percent. This protects you in case the market has losses. A variable annuity allows you to choose specific investments for your annuity. There is, of course, the risk of a higher gain than with a fixed annuity, and there is of course the risk of loss.

There is more to it, but you get the idea. Now, when your insurance agent tries to sell you an annuity you can say “no, thank you, I don’t want that” and not feel even a little bit guilty.

Photo via Mrs Logic