There are various types of annuities available in the market. Each has its own set of costs and features. Immediate and deferred annuities are the two basic forms of annuities. In case of an immediate annuity, the payouts are provided at once. The payouts depend on the contract terms, and can continue for life or a certain period of life. Deferred annuities are of two basic types, fixed and variable.In case of a fixed annuity, a guaranteed interest rate is provided over a specific period that varies from 1 to 5 years. What is a variable annuity? Where variable annuities are concerned, the interest rate depends on the value of the underlying investment and can change according to it. For investment purposes, variable annuity investors can choose from money market funds, bond and stock for diversifying portfolios or managing risk. Variable annuity tax must also be considered when undertaking this form of investment. There are various levels of guarantees that variable annuity can provide. Investors are rapidly adopting this new form of investment due to its protective features.