ANNUITY

An annuity is a series of equal payments at regular intervals. Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly reinsurance payments and pension payments. Annuities are classified by the frequency of payment dates.
The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other interval of time.An annuity which provides for payments for the remainder of a person's lifetime is a life annuity.

                           TYPES OF ANNUITIES

Annuities may be classified in several ways.

Timing of payments

Payments of an annuity-immediate are made at the end of payment periods, so that interest accrues between the issue of the annuity and the first payment. Payments of anannuity-due are made at the beginning of payment periods, so a payment is made immediately on issue.

Contingency of payments

Annuities which provide payments which will be paid over a period of time known in advance are annuities certain or guaranteed annuities. Annuities paid only under certain circumstances are contingent annuities. A common example is a life annuity, which is paid over the remaining lifetime of the annuitant. Certain and life annuities are guaranteed to be paid for a number of years, and then become contingent on the annuitant being alive.

Variability of payments

• Fixed annuities – These are annuities with fixed payments. The insurance company guarantees a fixed return on the initial investment. Fixed annuities are not regulated by the Securities and Exchange Commission.
• Variable annuities – Registered products that are regulated by the SEC in the United States of America. They allow direct investment into various funds that are specially created for Variable annuities. Typically the insurance company guarantees a certain death benefit or lifetime withdrawal benefits.
• Equity-indexed annuities – Annuities with payments linked to an index. Typically the minimum payment will be 0% and the maximum will be predetermined. The performance of an index determines whether the minimum, the maximum or something in between is credited to the customer.

Deferral of payments

An annuity which begins payments only after a pe