What Exactly Is an Annuity

An annuity is a long-term investment that is issued by an insurance company and is designed to help protect you from the risk of outliving your income. Through annuitization, your purchase payments (what you contribute) are converted into periodic payments that can last for life.

Which is the best definition of an annuity due?

Annuity due is an annuity whose payment is due immediately at the beginning of each period. Annuity due can be contrasted with an ordinary annuity where payments are made at the end of each period. A common example of an annuity due payment is rent paid at the beginning of each month.

What are the primary characteristics of an annuity?

Annuities provide three things: Guaranteed protection of principal (fixed, or fixed indexed annuities do this, NOT variable annuities – variable annuities are investments.) Guaranteed growth. Guaranteed income.