Annuities

In investment, an annuity is a series of payments of the same kind made at equal time intervals, usually over a finite term. Annuities are commonly issued by life insurance companies, where an individual pays a lump sum or a series of premiums in return for regular income payments, often to provide retirement or survivor benefits. Typical examples include regular deposits to a savings account, monthly home mortgage payments, monthly insurance premiums and pension payments. The value of an annuity is usually expressed as a present value or future value, calculated by discounting or accumulating the payments at a specified interest rate. Annuities can be classified by the timing of payments, for example annuity-immediate and annuity-due, by whether the term is fixed or contingent on survival, and by whether the amounts are fixed, variable or linked to an index. Contracts may start paying immediately or after a deferral period, and a contract that continues indefinitely is a perpetuity.