What is the Annuity in the world of Insurance?

Definition:

An Annuity is a specified sum payable at regular interval for a stipulated period of time. It is a purchase of future income, a systematic accumulation of cash which would be distributed later on in the desired by annuitant. It is not the same as life insurance.

Basic terms:

1. Annuitant-the person, to whom the annuity income is paid, usually the person who purchases the plan.

2. Vesting date- the date when the annuity income payment begins,

3. Successor-Payee- the person who receives the remaining annuity income in case the annuity income in case the annuitant dies before the fund is exhausted.

When do Annuities Commence?

Immediate Annuity:

 Payments start at stated period such as one month, here month or one year after the purchase.

Immediate Deferred Annuity

Payment start at the end of a specified number of years or until the annuitant attains a specified age or a predetermined date.

Common Types of Annuity

Retirement Annuity

An annual saving arrangement to provide a pension for  life with no life insurance coverage.

Joint and Survivorship Annuity

Usually covers both husband and wife where the annuitant receives income as long as he/she live. in case the dies the surviving spouse will receive income as long as he/she live