It might seem challenging to define annuities, but this is not really the case. When it comes to finding the right annuity definition, you could become confuse because they are generally sold by the insurance companies. However, you should know that annuities have different characteristics and are totally different products from the regular insurance policies.

annuity definition

Annuity Definition

An annuity is actually a contract that an insurance company sells to investors with a guarantee to pay an income at a specified time period when the investment matures. In most instances, the date will be set to correspond with the time when the investor retires.

Let’s take a further look at how annuity definition might be expressed. For the most part, the definition of this term must be looked on based on the investment option that you choose. For instance, if you choose a fixed rate annuity investment, you will get returns according to a fixed rate of interest. The definition usually differs based on the type of investment options.

  • If you want a regular income source during your retirement years and you are willing to pay a small amount of money monthly to accumulate a sizeable lump sum the definition for annuity will be different for you. Annuity definition Wikipedia and other sources will show that companies sell annuities with payment facilities set up to enable people like you to make contributions monthly towards your retirement fund. For this investment, you will get interest at a rate that is compounded to give you an excellent income source.
  • Variable annuity definition is given based on the contract that you will have with an insurance company. This is where you can make periodic payments that can start immediately or after retirement. Buying this contract can require you to make one payment or a series of payments.
  • For immediate annuity definition, this will indicate that it’s for those who want to invest in a lump sum to get immediate returns on investments. This means that if you choose this annuity, there is no need to wait until your retirement years to benefit. It is important to note that getting immediate returns on your investments will require you to invest a large amount of money.

annuity definition wikipedia

Now as you can see, you will find different versions of annuity definition because it would be difficult for the same rules to apply to the different types. The basics for the definitions are fairly simple though, you will invest in a plan to get returns immediately or during retirement years.