The annuity is basically the exact opposite of life insurance. While proceeds of life insurance are paid at the time of death of the insured, the proceeds of an annuity are paid while the annuitant is alive. Generally, the annuitant can never outlive the income from the annuity. However, you can also purchase an annuity, certain which will provide income only for a specified period of time. Annuities are primarily intended to provide a source of retirement income.
Payments can made to the annuitant monthly, quarterly, semiannually or annually.
Both the deferred and variable types are available on a single premium or flexible premium basis. With this type of annuity, you pay a single premium, and immediately receive payments, usually in monthly installments, as long as you live. Since payments cease upon your death you might consider the purchase of a life annuity with a guaranteed payment period, known as a life annuity with period certain. If your guaranteed payment period is ten years, and you die before collecting for ten years, your beneficiary would continue to receive the annuity payments until the end of the period. Another variation is the cash refund life annuity which provides that if you have not received installment benefits equal to the original premium payment before your death, the balance would be payable to your beneficiary in a lump sum payment.