How Do Annuities Work? 
Annuities work by the insurance company taking your premium in a lump sum or series of payments , investing it , and crediting you with a fixed and/or variable interest rate during what is called the accumulation period . The insurance company then pays the premium and interest back out to you in payment installments during what is called the annuity period . These annuity payments to you can be for a set period of time or for life . Annuities do not have medical requirements , are flexible due to having many options in how they are structured , and the growth in an annuity is generally tax deferred until it is payed out during the annuity period . 