We have changed our privacy policy. In addition, we use cookies on our website for various purposes. By continuing on our website, you consent to our use of cookies. You can learn about our practices by reading our privacy policy.
© 2016 Shmoop University, Inc. All rights reserved.

Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Immediate Annuity


Immediate annuity is a fast-acting annuity that's also a twisted version of a life insurance policy.

In a typical term life insurance plan, you pay, say, $75 a month "forever," and when you die, your wife and the dude she later marries get a check. Hopefully, you've lived and paid long enough that it's a pretty big check—maybe a million or more. That'll buy a lot of margaritas in Honolulu. Your wife and new guy can annuitize the money and get a certain amount every month to live on.

An immediate annuity is kind of the opposite.

You write a big check for a lot of money to the insurer up front, and the insurer then pays you in set payments every month or year while you're alive. You (not husband #2) can then use that money as income.