How Does A Single Premium Deferred Annuity Work? 
A single premium annuity is a life insurance product . It is a contract written and guaranteed by a life insurance company . It operates exactly opposite from a life insurance policy . The contract promises to make monthly deposits for the rest of the life of the annuitant in exchange for a single lump sum . This is accomplished by studying life expectancy . The company knows that some will live for a shorter period than life expectancy , while others will live longer . By balancing these factors and including interest earned on the lump sum the company can write a contract and include promises that it can keep . 