The term "annuity" derives from a Latin term meaning "annual" and generally refers to any circumstances where principal and interest are liquidated through a series of regular payments made over a period of time.

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There are two main types of annuities: Immediate and Deferred. 

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• Immediate Annuity - in exchange for a single, lump-sum premium, the insurance company agrees to begin paying a regular income to the purchaser for a certain number of years or for life. 

• Deferred Annuity - can be funded as a lump-sum or as a flexible series of payments over time. The income, and any taxes due on growth inside of the annuity, are pushed into the future, until they are actually received by the owner as payments. Payments to the owner/annuitant can be made for a fixed period of time (i.e., 15 years), over the life or lives of specified individuals, or a combination of the fixed and lifetime options (i.e., the longer of 15 years or until the annuitant passes away).