ANNUITY

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.