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Finance

What is an Annuity Buyer?

By Luke Arthur
Updated Feb 22, 2024
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An annuity buyer is a company or individual who purchases annuity contracts from other parties. Many individuals saving for retirement have purchased an annuity contract from an insurance company at some point. If the individual decides that he or she does not want to receive regular annuity payments any longer, he or she can sell the annuity to an annuity buyer. The annuity buyer will provide the owner of the annuity with a lump sum of cash. Annuity buyers could come in the form of an investment company, an annuity provider, or an individual investor.

An annuity is a type of contract between an individual and an insurance company. The insurance company sells the annuity contract to the individual to provide him or her with a stable payment during retirement years. Annuity contracts can be set up to provide income for a certain number of years or for the life of the annuity contract holder.

Many times, after purchasing an annuity, an individual decides he or she no longer wants small regular payments. Instead, he or she now desires a large lump sum of cash. For example, if the individual found out he or she has a terminal disease, a lump sum of cash might be more attractive than small payments for the next 20 years. In this case, the individual may choose to work with an annuity buyer to sell the contract.

The annuity buyer will assess the value of the contract and make an offer to the individual. The offer will be based on the size of the annuity payment and the amount of time left on the annuity contract. Each annuity buyer will pay different amounts based on individual criteria.

In most cases, there are three different types of annuity buyers. One common type of annuity buyer is an investment company. These companies look to purchase annuity contracts as long-term investments. They will include these annuities in portfolios for investors as a way to create steady income.

Another type of annuity buyer is an annuity provider. Some insurance companies that sell annuity contracts will buy back the contract for a certain amount from the individual. This allows the annuity company to make money on the sale of the contract and when it is purchased back. In some cases, individuals will also buy annuities from annuity owners.

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