Annuity Type 2: Immediate Annuities

An immediate annuity simply provides an investor with a string of payments (usually monthly) for a specified period of time. The time could be for a known period of time such as five years or for an undetermined period such as a person’s remaining life. When an immediate annuity is for a known period of time (e.g. five years) it is a period certain annuity. When an immediate annuity is based on a person’s life, it is known as a life annuity. A cross between the two - someone’s life with a guaranteed minimum time - is known as a life annuity with a period certain. In any case, once the payments have been made for the specified period, they cease. Nothing more is paid.