In personal finance, a contract that provides regular payments in exchange for money paid to an insurer is an annuity.
Annuities are insurance products designed to provide income over a specified period or for life, depending on the contract. A person may make a single payment or a series of payments, then receive income immediately or at a later date. Contracts can differ substantially in fees, guarantees, investment choices, and surrender restrictions.
Fixed annuities generally promise specified interest or payments under contract terms, while variable annuities link account value to investment subaccounts. Indexed annuities use formulas tied to an index but include contractual limits and features that differ from direct index ownership.
Annuities are not the same as bank deposits, and guarantees depend on the claims-paying ability of the issuing insurer. Taxes, penalties, and beneficiary provisions depend on the contract and applicable law.