What Is The Definition Of A Fixed Immediate Annuity

The fixed immediate annuity is one of the more simplistic types of annuity contracts offered by insurance companies. In contrast to other variations of annuity products on the market, immediate annuities tend to be some of the more uncomplicated financial products. As with other financial instruments however, they can seem too difficult to understand until they have been properly explained.

The annuity contract is one of the oldest forms of insurance product still offered today. The roots of this instrument can be traced as far back as Roman culture, and was introduced in America in the mid 18th century. The early American annuities were offered by public groups up until the early 20th century, at which point they were given more exposure to the public.

The annuity in the most basic terms is simply an insurance contract between an investor and an insurance company. The investor agrees to pay the insurance company a sum of money in return for a future monetary benefit. This benefit often comes in the form of a fixed income stream of payments back to the annuities designated beneficiaries.

The bulk of most, if not all, annuity contracts fall under either the immediate annuity or the deferred annuity contracts. These fixed annuities differ in at least one key area, the distribution phase. In an immediate annuity, the contract begins payments to the beneficiary one time period after the contract start date. This means after one month in a monthly annuity, and after one year with an annual contract.

The deferred annuity begins payments on a deferred schedule and may start distribution any time in the future. This type of contract will typically allow premiums to be paid either through a one-time lump sum payment or over a series of premium payments. In contrast, the vast majority of immediate annuity contracts are paid in full at the time of purchase.