What Is an Annuity?

An annuity is an agreement that investors make with an insurance company. The (Investor) customer gives the insurance company a sum of money, either as a lump sum or in installments. The insurance company invests the funds and agrees to make payments over a determined period of time. In simple terms, you give money, in promise of future monthly income that will be paid out for a defined period of time.

Unlike other insurance contracts, the payments don’t depend on the customer undergoing an accident or suffering a unfortunate event in order to receive a payment. Instead of filing a claim, the customer determines the conditions under which they’ll receive their payouts.

The conditions come in two forms.

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