Annuity

(1) When the sum of annual interest and redemption payments on a loan is equal for each period. The redemption share increases annually in the amount of interest saved. (2) A form of financial contract that provides an income for a specified period of time. These contracts are mostly sold by life insurance companies that guarantees a fixed or variable payment of income benefit (monthly, quarterly, half-yearly, or yearly) for the life of a person (the annuitant) or for a specified period of time. It is different from a life insurance contract which provides income to the beneficiary after the death of the insured. An annuity may be bought through instalments or as a single lump sum. Benefits may start immediately, at a pre-defined time in the future, or at a specific age.