What is Premium (Annuity)?
In the context of annuities, the premium is the lump-sum payment you make to the insurance company to purchase the contract. For a MYGA or fixed annuity, this is typically a single payment made at the time of purchase.
Premium Minimums and Tiers
Most fixed annuities have minimum premium requirements that vary by product. Common minimums range from $2,500 to $100,000. Some carriers offer higher credited rates at higher premium levels (for example, a better rate for deposits of $100,000 or more), known as rate tiers or premium bands.
Maximum premiums also exist, typically in the range of $1 million to $5 million per contract, though this varies by carrier and product.
Premium and Tax Status
Whether your premium comes from after-tax savings (non-qualified) or pre-tax retirement funds (qualified) determines how your future withdrawals will be taxed. Your premium amount also becomes your cost basis in a non-qualified contract.
