How Do Annuities Work? 
Different types of annuities work in different ways , but the gist of an annuity is that you pay an insurance company some money , they grow it on a tax deferred basis , and pay it back to you . You can pay or collect the money in a lump sum or at regular intervals ; the payments may be guaranteed or variable ; the annuity may be set up for a set period of time or for a lifetime ; or other features . However , the basic premise is as described . 