What Exactly Are Annuities? 
In Canada annuities there are two main types of annuities : accumulation annuities and payout annuities . If they are issued by an insurance company they can/do include maturity & death benefit guarantees , potential creditor proofing , estate bypass -LRB- privacy and costs -RRB- and more . They are used extensively by retirement and estate planners . The topic of annuities with all our industry jargon is indeed confusing . Experience has taught me that an understanding the basics is the key step . 1 . An accumulation annuity is as the name suggests is used to save money , a payout annuity option is included as part of the contract . There are two main types of accumulation annuities : Guaranteed Interest Annuity -LRB- GIA -RRB- - principle is guaranteed and interest is earned similar to a GIC Guaranteed Investment Fund -LRB- GIF -RRB- - similar to a mutual fund , the principle is at risk , however , with maturity and death benefit guarantees , etc. . In Canada , they are also referred to a segregated funds or variable annuities . 2 . Payout Annuities , you exchange a sum of money for a flow of income . There are many variations with different guarantees but the basic two types are : Annuity certain , where in exchange for a lump sum of money you receive a guaranteed income for a specified number of years . Life annuity , where in exchange for a lump sum of money you receive a guaranteed income for the rest of your life or with a joint life . These are usually purchased with a guarantee payment period . The more guarantees , the lower the income . To understand an annuity , first understand a mortgage . With a mortgage you receive a lump sum of money and pay back principal and interest over a specified term until the balance is zero . With a payout annuity certain you are at the opposite side of the equation , you exchange a lump sum of money for a guaranteed income stream for a specified term . You will find 16 `` I want to ... How do I '' , that illustrates some strategies using annuities on www.jpw.ca Annuity strategies can be complicated . It is your money and you would be prudent work a life insurance broker with a professional designation like a CLU -LRB- Chartered Life Underwriter -RRB- or a CFP -LRB- Certified Financial Planner -RRB- . If you have further questions please contact me . Paul 