Where to buy an annuity and what you need before you start

You buy an annuity from an insurance company, through a licensed insurance agent, a financial advisor, or directly from the insurer's website. Before you contact anyone, you need to know three things: how much money you have to invest (the purchase price), what age you are, and roughly when you want the payments to start. Insurance companies underwrite annuities based on your age and health, so some will ask medical questions or require a medical exam, particularly for larger purchases.

The process itself is straightforward: you choose a product, complete an process, provide proof of funds, and sign a contract. The entire transaction typically takes one to three weeks from process to funding. Unlike buying stocks or bonds, you cannot shop for an annuity on a public exchange — each insurance company sets its own rates and terms, so comparing quotes from multiple insurers is essential before you commit.

Key Takeaways

  • You purchase annuities directly from insurance companies, through licensed agents, or via financial advisors — never from a government office or online marketplace.
  • You will need to provide proof of funds (bank statements or investment account statements showing the money you plan to invest), your age, and your Social Security number.
  • Rates and terms vary significantly between insurance companies, so obtaining quotes from at least three insurers before deciding is standard practice.
  • The underwriting process can take one to three weeks and may include health questions or a medical exam depending on your age and the amount you are investing.
  • Once you sign the contract and the insurance company receives your money, the annuity is funded and cannot be cancelled without penalties in most cases.

Gather your financial documents and personal information

Start by collecting the documents the insurance company will request. You will need a recent bank statement or investment account statement showing the funds you plan to use for the purchase. This proves you have the money available. Bring your Social Security number, date of birth, and a government-issued photo ID. If you are married or have a designated beneficiary, have their name and Social Security number ready as well.

If you are buying an annuity with money from a retirement account (such as an IRA or 401(k)), you will need documentation showing the account exists and the balance. Some annuities are purchased with a lump sum from a pension or settlement; if that applies to you, bring the paperwork showing that payment. Insurance companies verify these funds before they process your process, so having clear, recent statements saves time.

Decide what type of annuity fits your situation

The main types are when ready annuities (you invest a lump sum and receive payments starting within a year), deferred annuities (you invest now and payments start later), fixed annuities (payments are the same amount each period), and variable annuities (payments depend on investment performance). Each has different costs, payout structures, and tax treatment. Your choice depends on when you need income to start, how much certainty you want about payment amounts, and your overall financial plan.

This decision is not something to rush. Many people benefit from discussing their situation with a financial advisor or tax professional before choosing a type. Insurance agents can explain the mechanics of each product, but they cannot tell you which one is right for your specific circumstances — that requires understanding your other income sources, tax situation, and goals. Some people buy multiple annuities of different types to balance income certainty with growth potential.

Obtain quotes from multiple insurance companies

Contact at least three insurance companies or use a broker who can pull quotes from multiple insurers. You can find insurers through the National Association for Insurance Commissioners (NAIC) website, which lists licensed companies by state. Major insurers include Fidelity, Vanguard, Schwab, Allianz, and Athene, but many regional and smaller companies also sell annuities. When you request a quote, provide the same information to each company: your age, the amount you want to invest, the type of annuity, and when you want payments to start.

Rates change daily, so quotes are typically valid for 30 to 60 days. Write down the quote amount, the monthly or annual payment, any fees, and the company's financial rating (check ratings through A.M. Best or Moody's to verify the insurer can pay claims). Do not assume the highest payment is the best deal — compare what you are paying in fees, whether there are surrender charges if you need to withdraw early, and whether the company offers riders (add-ons) you might want later.

Complete the process and underwriting process

Once you have chosen an insurer, you will complete a formal process. This includes personal information (name, address, date of birth, Social Security number), beneficiary information, and details about the annuity you want to purchase. The process also asks about your health, occupation, and sometimes your income or net worth. Answer these questions accurately — insurance companies verify information and can deny claims later if they find misrepresentations.

After you submit the process, the insurance company's underwriting department reviews it. For smaller purchases (typically under $100,000) and younger applicants, this may take a few business days. For larger amounts or applicants over 75, the company may order a medical exam or ask for medical records. You will be notified if additional information is needed. Once underwriting approves your process, the company sends you a contract to sign and instructions for sending your money.

Send your funds and receive your contract

The insurance company will specify how to send the money — typically by wire transfer, check, or ACH transfer from your bank account. Do not send money before you have a signed contract in hand. Wire the funds only to the account number and bank the insurance company provides in writing; never wire to an account number given over the phone without verifying it in writing first.

Once the company receives your funds, it will confirm receipt and provide you with a contract showing the annuity terms, the payment amount, the start date, and any fees or surrender charges. Read this document carefully. You typically have a period (often 10 to 30 days, depending on your state) to review the contract and cancel if you change your mind — this is called a free look period. After that period ends, cancelling usually means paying a surrender charge, which can be substantial in the early years.

Understand fees and surrender charges before you commit

Annuities can carry several types of costs. A surrender charge is a penalty for withdrawing money or cancelling the contract within a set period (often 5 to 10 years). The charge typically starts high and decreases each year. Some annuities charge an annual fee or mortality and expense fee, which is deducted from your account or your payments. Variable annuities often charge investment management fees as well. Fixed annuities typically have lower fees than variable ones.

Ask the insurance company for a written breakdown of all fees before you sign. Understand what happens if you need to withdraw money early — some annuities allow a small withdrawal each year without penalty, while others charge a fee on any withdrawal. Knowing these costs upfront prevents surprises later. If the fees seem high or you do not understand them, ask the agent to explain in writing or consult a financial advisor before proceeding.

Frequently Asked Questions

Can I buy an annuity with money from my IRA or 401(k)?

Yes. Money in a traditional IRA or 401(k) can be used to purchase an annuity without triggering when ready taxes, though withdrawals from the annuity later will be taxed as ordinary income. Roth IRA funds can also be used, and may have access to withdrawals from the annuity may be tax-free. Consult a tax professional before moving retirement funds into an annuity, because the rules vary by account type and your age.

What happens if the insurance company fails?

State insurance may provide funds protect annuity owners if an insurance company becomes insolvent. Coverage limits vary by state but typically range from $100,000 to $500,000 per owner per company. Check your state's insurance commissioner's website to learn your state's specific limits. This is one reason to verify the insurer's financial rating before you buy.

Can I change my mind after I buy an annuity?

Most states give you a free look period of 10 to 30 days after you receive the contract to cancel without penalty. After that period, cancelling means paying a surrender charge, which decreases over time. Some annuities allow penalty-free withdrawals of a small percentage each year. Read your contract to understand what options you have.

Do I need a financial advisor to buy an annuity?

You can buy directly from an insurance company or through an agent, but many people benefit from discussing the decision with a financial advisor or tax professional first. An advisor can help you decide whether an annuity fits your overall plan and which type makes sense for your situation. Insurance agents can explain products but cannot advise you on whether to buy.

What is the difference between buying from an agent and buying directly from the insurance company?

Buying directly from the insurer's website or phone line may offer slightly lower costs because there is no agent commission. Buying through an agent or advisor means you have someone to ask questions and help you understand the contract, but the agent is paid a commission (usually built into the product cost). The annuity terms and rates may differ slightly between channels, so compare quotes from both.