What is the definition of Annuity?

An annuity is a special kind of insurance contract. It works like an investment account and it usually provides regular payments (often monthly) until the annuitant dies.

Annuities come in two major kinds - the deferred and immediate.

• Deferred annuities - These don't give the regular payments to the annuitant immediately. It comes with an income phase and the savings phase. For the saving phase, the annuity owner pays the company a specified amount for a specified length of time, allowing the annuity value to increase through the years. Then, when the annuitant reaches a certain age (i.e. retirement age), the payments start.
• Immediate annuities are contracts which require a lump sum cash payment and that will provide the annuitant with his regular "income" within 1 year.

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• Employer’s Liability