What is the primary characteristic of Fixed Annuities?

Fixed annuities are primarily characterized by offering a guaranteed minimum rate of interest. This means that the insurer commits to providing a specific interest rate for the period of the annuity, ensuring that the policyholder will receive at least that rate on their investment. This feature makes fixed annuities particularly appealing to individuals seeking stable, predictable returns without exposure to market volatility.

In contrast, variable payouts typically associate with variable annuities, where the payout depends on the performance of underlying investments. A requirement for an additional securities license pertains to variable annuities, but not to fixed annuities, which simplifies the licensing process for agents selling fixed products. Fixed annuities are also not regulated by the Securities and Exchange Commission (SEC); rather, they fall under the jurisdiction of state insurance regulators. Thus, the concept of a guaranteed minimum interest rate is central to understanding what makes fixed annuities distinctive in the context of life and disability products.