Funding Agreement

What Does Funding Agreement Mean?

A funding agreement is an investment vehicle in which an individual pays a lump sum to the seller in exchange for a fixed return. Funding agreements are generally considered low-risk investments, which is why they are commonly purchased by pensions, mutual funds, and other similar entities.

Insuranceopedia Explains Funding Agreement

Funding agreements are essentially a way for investors to earn money without taking on significant risks. They are somewhat similar to certificates of deposit (CDs) and annuities. However, because funding agreements are typically low-risk and designed to provide steady, safe returns, they tend to offer only modest investment gains. As a result, they are often used more for preserving wealth than for seeking substantial growth.