You buy an annuity by contacting an insurance company, financial advisor, or broker, completing an process, and signing a contract that specifies your payment terms

An annuity purchase is a transaction between you and an insurance company. Unlike buying stocks or mutual funds through a brokerage account, you cannot straightforward place an order online at most providers. The process involves paperwork, underwriting (a review of your health and finances), and a waiting period before payments begin. The exact steps depend on the type of annuity you want, who you work with, and whether the insurance company requires a medical exam.

This guide walks through the actual purchase process, from deciding where to buy to signing the contract and receiving your first payment. It covers what documents you will need, what questions to expect, and what happens after you commit your money.

Key Takeaways

  • You can purchase an annuity directly from an insurance company, through a financial advisor, or via a broker, and each route has different fee structures and support levels.
  • Most annuity purchases require you to complete an process, provide proof of income or assets, and sometimes undergo a health review before the company approves the contract.
  • The underwriting process typically takes one to four weeks, depending on the type of annuity and the insurance company's workload.
  • Once you sign the contract, you cannot change your mind without penalties, so reviewing the terms carefully before signing is critical.
  • Your first payment arrives on the date specified in the contract, which may be weeks or months after you sign, depending on the annuity type.

Where to Buy an Annuity

You have three main routes to purchase an annuity: directly from an insurance company, through a financial advisor, or via an independent broker. Each has different costs and levels of guidance.

Direct purchase from an insurance company means you contact the insurer yourself—by phone, website, or in-person office—and work with their sales representative. Companies like Fidelity, Vanguard, Schwab, Equitable, and Allianz all sell annuities this way. Direct purchase often has lower fees because there is no middleman, but you are responsible for understanding the product and asking the right questions.

Financial advisors

Independent brokers

Documents and Information You Will Need

Before you contact an insurance company or advisor, gather the documents and information the underwriting team will request. Having these ready speeds up the process.

You will need proof of identity (a driver's license or passport), your Social Security number, and your date of birth. The insurance company uses this to verify who you are and to run a background check.

You will also need to show proof of income or assets. If you are buying with a lump sum, bring a recent bank or investment account statement showing the money exists. If you are buying with proceeds from a retirement account or insurance settlement, bring documentation of that source. The insurance company wants to confirm the money is legitimate and not borrowed.

For when ready annuities (which start payments right away), the company may ask for your medical history or require a medical exam, especially if you are buying a large contract or are under age 75. This helps the insurer calculate how long you are likely to live and set your payment rate accordingly. For deferred annuities (which start payments later), medical underwriting is less common unless the contract is very large.

The process and Underwriting Process

Once you have chosen a provider and annuity type, you will complete an process. This is a formal document that asks about your age, health, income, assets, and how you plan to use the annuity. Be honest and complete—false information can void the contract later.

The process also asks you to specify the contract terms: how much money you are putting in, what type of payout you want (single life, joint life, period certain, or a combination), and when you want payments to start. These choices are binding once you sign, so review them carefully.

After you submit the process, the insurance company's underwriting team reviews it. They verify your identity, check your financial information, and assess risk. If you are buying an when ready annuity, they may order a medical report or ask you to complete a health questionnaire. This step typically takes one to four weeks, though it can be faster if the contract is small or slower if the company is backlogged.

During underwriting, the company may contact you with questions or ask for additional documents. Respond promptly—delays on your end extend the timeline. Once underwriting is complete, the company issues a contract for you to sign.

Reviewing and Signing the Contract

The annuity contract is a legal document that spells out everything: the amount you are investing, the payment amount and frequency, the start date, any guarantees, fees, and what happens if you die or want to withdraw money early. Read it carefully, or have an advisor or attorney review it with you.

Pay close attention to the may provide period (if any), the payment amount, and any surrender charges. A surrender charge is a penalty you pay if you withdraw money before a certain date—typically five to ten years after purchase. Some annuities have no surrender period; others charge 5 to 10 percent of your withdrawal amount in the early years, declining over time.

Ask the company or advisor to explain anything you do not understand. Once you sign, you are locked in. Most annuities cannot be cancelled without a penalty, and some cannot be cancelled at all. If you have second thoughts, check whether your state has a free-look period—typically 10 to 30 days after you sign—during which you can return the contract and get your money back.

Sign the contract and return it to the insurance company. Some companies accept electronic signatures; others require a wet signature (pen and paper) mailed or delivered in person.

Funding the Annuity

After the company receives your signed contract, you need to fund it—that is, send the money. The contract specifies how to do this and the important date.

For most annuities, you wire the money directly from your bank account to the insurance company's account, or you mail a check. The company provides wire instructions or a mailing address. Wire transfers are faster (usually one to two business days) and leave a clear record, so they are preferred. Do not send cash.

If you are funding with a rollover from a retirement account (like an IRA or 401(k)), the process is more complex. Your current account custodian sends the money directly to the insurance company, and you must follow IRS rules to avoid taxes and penalties. Work with both your current custodian and the insurance company to coordinate this—they handle the paperwork, but you need to initiate the request.

Once the insurance company receives your funds, they confirm receipt and set your payment start date. For when ready annuities, payments typically begin within 30 to 60 days. For deferred annuities, payments start on the date you specified in the contract, which may be years away.

After You Sign: What Happens Next

After funding is complete, the insurance company sends you a policy document (also called a certificate or contract summary). This is your proof of ownership and the official record of your annuity terms. Keep it in a safe place.

The company also sends you information about how to receive payments—whether by direct deposit, check, or wire transfer—and how to contact them if you have questions or need to make changes. Some changes are allowed (like updating your address or beneficiary), while others (like changing the payment amount or start date) are not.

Your first payment arrives on the date specified in the contract. If you chose monthly payments, you will receive a payment every month for the rest of your life (or for the period you chose). If you chose annual payments, you receive one payment per year. The payment amount is fixed unless you bought a variable annuity, which fluctuates based on investment performance.

Keep records of all payments and correspondence with the insurance company. If you ever need to file a claim—for example, if a payment is missed or if you need to update your beneficiary—you will have documentation of your contract and payment history.

Common Mistakes to Avoid During Purchase

One frequent mistake is rushing the decision. Annuities are complex products with long-term consequences. Take time to understand what you are buying, compare rates from multiple companies if possible, and ask questions until you are confident.

Another mistake is not reading the contract before signing. Some people sign based on a sales pitch or a summary and later discover terms they did not expect—like high surrender charges, limited payout options, or fees they were not told about. The contract is the legal truth; everything else is just conversation.

A third mistake is not considering alternatives. An annuity is one way to create may provide income, but it is not the only way. Bonds, Treasury securities, and Social Security all provide income with different trade-offs. Before you buy an annuity, make sure it is the right tool for your situation, not just a product someone is selling you.

Finally, do not assume you can change your mind later. Annuities are designed to be long-term commitments. If you need access to your money soon, the surrender charges can be steep. Only buy an annuity with money you are confident you will not need for several years.

Frequently Asked Questions

How long does it take from the time I decide to buy until I receive my first payment?

The timeline varies, but typically four to eight weeks. process and underwriting take one to four weeks, signing and funding take one to two weeks, and then the company processes your contract and schedules your first payment. when ready annuities may start payments within 30 to 60 days of funding; deferred annuities start on whatever date you chose in the contract.

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

Yes. You can roll over funds from a 401(k), IRA, or other retirement account into an annuity without triggering taxes, as long as you follow IRS rules. The process involves your current account custodian sending the money directly to the insurance company. Work with both institutions to coordinate the paperwork—do not withdraw the money yourself, or you may owe taxes and penalties.

What happens if I change my mind after I sign the contract?

Most states allow a free-look period of 10 to 30 days after you sign. During this time, you can return the contract and receive a full refund of your money. After the free-look period ends, you are locked in. If you withdraw money early, you will pay surrender charges, which can be 5 to 10 percent of your withdrawal in the early years.

Do I need a financial advisor to buy an annuity, or can I do it myself?

You can buy directly from an insurance company without an advisor. However, annuities are complex, and a mistake in choosing the wrong type or terms can cost you money for decades. If you are not confident in your understanding, paying an advisor or broker to explain your options is often worth the cost.

What if the insurance company goes out of business after I buy the annuity?

State insurance regulators oversee insurance companies and require them to maintain reserves to pay claims. If an insurer fails, your state's insurance guaranty fund steps in to protect your annuity payments, up to a limit (typically $250,000 per contract per company). This protection is automatic—you do not need to do anything. To minimize risk, buy from well-established, highly rated insurance companies.