RESOURCES - annuity
Overview

An insurance contract that pays a monthly, quarterly, semiannual or annual income benefit for the life of an individual (annuitant), for the lives of two or more individuals, or for a specified period of time. The annuitant cannot outlive the income from the annuity. Although a basic principle of life insurance is to provide an income for a beneficiary at the death of the insured, the annuity is planned to provide an income for life for the annuitant. There are different ways payments are made by a buyer during the accumulation period (paying for the contract), and in the way payments are made to the annuitant during the liquidation period (receiving distributions from the contract). Gains grow on a tax deferred basis.