noun an·nu·i·ty \ ə-ˈnü-ə-tē , -ˈnyü- \
Updated on: 26 Jul 2017

Definition of annuity

plural annuities
1 :a sum of money payable yearly or at other regular intervals
2 :the right to receive an annuity
3 :a contract or agreement providing for the payment of an annuity

Examples of annuity in a Sentence

  1. Part of her retirement income will come from an annuity.

  2. his grandfather's will provided him with an annuity of $5,000 a year to be used for school expenses

Recent Examples of annuity from the Web

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Did You Know?

This is a payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. Under an annuity certain, a specified number of payments are made, after which the annuity stops. With a contingent annuity, each payment depends on the continuance of a given status; for example, a life annuity continues only as long as the recipient survives. Contingent annuities depend on shared risk. Everyone pays in until the annuity begins; some will live long enough to collect more than they have paid, while others will not live long enough to get back the money they invested.

Origin and Etymology of annuity

Middle English annuite, from Anglo-French annuité, from Medieval Latin annuitat-, annuitas, from Latin annuus yearly

Financial Definition of ANNUITY


What It Is

An annuity is a financial contract written by an insurance company that provides for a series of guaranteed payments, either for a specific period of time or for the lifetime of one or more individuals.

How It Works

An annuity is similar to a life insurance product, but there are important differences between the two. Under the terms of a life insurance policy, the insurer will generally make a payment upon the death of the insured. Under the terms of an annuity, the company makes its payments during the lifetime of the individual. In addition, unless the annuity contract specifies a beneficiary, most annuity payments cease upon the death of the recipient.

There are several ways categorize types of annuities:

Immediate Annuities are usually purchased at retirement age, with benefits that begin immediately (within one year of purchase).

Deferred Annuities offer benefit payments that begin at some future date. Interest usually accrues on a tax-deferred basis in the interim.

Qualified Annuities are annuities that an investor funds with either pre-tax dollars or tax-deductible contributions.

Non-Qualified Annuities are those contracts funded with after-tax dollars.

A Fixed Annuity is a personal retirement account in which the earnings are based on a fixed rate set by the insurance company. Fixed annuities are susceptible to inflation risk due to the fact that there is no adjustment provided for runaway inflation.

A Variable Annuity is a personal retirement account in which the investment grows tax-deferred until the investor is ready to withdraw the assets. Another important feature of the variable annuity is the family protection, or death benefit, that often comes along with such contracts. This guarantees that, should the investor die during the accumulation phase of the variable annuity, the account owner's beneficiary will receive at least the amount of the investor's contributions minus withdrawals or the current market value of the account.

Why It Matters

Unlike an IRA, there are no restrictions on the amount of the annual investment. In addition, variable annuities offer the potential for greater returns and the opportunity for the investor to make his/her own decisions regarding how the assets are invested.

Annuities are often obtained from a structured settlement of a personal injury lawsuit.

ANNUITY Defined for English Language Learners



Definition of annuity for English Language Learners

  • : a fixed amount of money that is paid to someone each year

  • : an insurance policy or an investment that pays someone a fixed amount of money each year

ANNUITY Defined for Kids


noun an·nu·ity \ ə-ˈnü-ə-tē , -ˈnyü- \

Definition of annuity for Students

plural annuities
:a sum of money paid yearly or at other regular intervals

Law Dictionary


noun an·nu·ity \ ə-ˈnü-ə-tē, -ˈnyü- \

legal Definition of annuity

plural annuities
1 :an amount payable at regular intervals (as yearly or quarterly) for a certain or uncertain period
2 :the grant of or the right to receive an annuity
  • his will included annuities for several old friends
3 :a contract (as with an insurance company) under which one or more persons receive annuities in return for prior fixed payments made by themselves or another (as an employer)
annuity certain plural annuities certain
:an annuity payable over a specified period even if the annuitant dies
annuity due plural annuities due
:an immediate annuity in which the payment of the benefits is made at the beginning of each payment interval rather than at the end
contingent annuity
:an annuity whose starting or ending date depends on the occurrence of an event (as the death of the annuitant) whose date is uncertain
conventional annuity
:an annuity under which the annuitant receives a specified minimum amount at each payment — compare variable annuity in this entry
deferred annuity
:an annuity in which payment of benefits is delayed until a particular time (as at retirement) — compare immediate annuity in this entry
group annuity
:a pension plan paying annuity benefits at retirement for all eligible persons under a single master contract usually issued to an employer for the benefit of its employees
immediate annuity
:an annuity purchased with a single premium in which payment of benefits begins within the first payment interval (as within a year) — compare deferred annuity in this entry
joint-and-survivor annuity
:an annuity payable as long as any of the two or more annuitants remains alive called also joint-and-last-survivor annuity, joint and survivorship annuity, joint life and survivorship annuity; compare joint life annuity in this entry
joint life annuity
:an annuity payable only until the death of any of the annuitants called also joint annuity; compare joint-and-survivor annuity in this entry
life annuity
:an annuity payable during the annuitant's lifetime and terminating at death called also straight life annuity
life income-period certain annuity
:an annuity that guarantees a minimum number of payments even if the annuitant dies before the minimum amount is paid or a minimum number of payments plus income for life if the annuitant is still alive after the minimum amount is paid
refund annuity
:an annuity in which payments to the annuitant or to the annuitant's estate or to a beneficiary are guaranteed to equal at least the amount of the premium paid for the annuity
straight life annuity
:life annuity in this entry
variable annuity \ˈver-ē-ə-bəl-\
:an annuity that is backed primarily by a fund of common stocks and whose payments go up or down depending on how well the stocks perform — compare conventional annuity in this entry, variable life insurance at life insurance

Origin and Etymology of annuity

Medieval Latin annuitas, from Latin annuus yearly

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