Definition:

Annuity is an insurance contract that promises to pay an invested amount in the form of regular income. This is for a specific time period or lifetime. Annuity in simple words is a retirement plan meant to provide you with a pension. It gives income at regular intervals over a certain time period which maybe even a lifetime .

Description:

The annuity plan holder makes the payment either regularly or in a lump sum. The returns in an annuity plan may be fixed or variable depending on the plan option opted by you. There are different options to choose from when buying an annuity plan.

Types:

Immediate Annuity: In an immediate annuity plan the policyholder has to pay a lump sum amount to the insurance company. In return, he starts receiving the annuity immediately for a limited time period or for a lifetime.

Deferred Annuity: Deferred annuity plan provides you annuity after the completion of a certain time period. In a deferred annuity option, the annuitant invests an amount of money in parts or lump sum and waits for a certain time period after which he starts receiving regular payments.

Periodic Annuity: Periodic annuity pays you annuity on a regular basis at set intervals. This could be in different phases. Maybe you can receive annuity monthly or at the end of 5th,10th,15th or 20th year.

Lump-Sum Annuity: Lump Sum annuity plans offer one-time payment to the investor in return to the payments made by him for the purchase of annuity plan. Lump-Sum annuity plan provides you with a lump sum amount of money at one go to fulfill all your desires.