How Do Insurance Annuities Work? 
An annuity uses the same data that a life insurance policy uses . The life insurance policy protects the client from the financial effects of a premature death . The annuity protects the client from the financial effects of living too long and running out of money . In an annuity , people pool together to provide a lifetime income . Statistically most will live to life expectancy . Some will die earlier and a few will die much later . By pooling their assets they can meet the needs of all . The amount paid by those who die prematurely will offset the expense of those who live a very long time . 