Annuity

A regular periodic payment made by an insurance company to a policyholder for a specified period of time.

Payments of a fixed amount for a certain period of time. Example: A seller of a business may design the selling price to include long term payments with or without interest. Also seen in insurance policies to fortify a person's retirement.

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An insurance product that pays an income benefit on a specific date, for a specific time, or for the lifetime of the person(s) receiving the annuity (the annuitant). A fixed annuity guarantees fixed payments with a constant rate of return. A variable annuity's value fluctuates with that of the assets that are backing it. There is no guaranteed rate of return for a variable annuity; the annuitant bears the investment risk and receives the return actually earned on invested assets less charges assessed by the insurance company.

A stream of even (equal) cash flows occurring at regular intervals- such as even monthly lease payments. An annuity in advance is one in which the annuity payment is due at the beginning of each period. An annuity in arrears is one in which the annuity payment is due at the end of each period.