What is the definition of Annuity Contract?

An Annuity Contract is the written agreement between an individual and an insurance company. The contract (like any other contract) states each of the party's responsibilities and benefits. The contract specifies how much the annuitant will pay and for how long, and it specifies the minimum amount that the insurance company will pay once the payment period starts. Thus, the contract serves as the annuitant's guarantee that he will be paid the amount since the insurance company is bound by the contract to do so. This makes the annuity a risk-free retirement income for the annuitant. This contract may exist under a 403 (b) plan.

An annuity contract belongs to what are called tax-sheltered annuities or tax-deferred annuities.

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