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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Immediate Annuity

Definition:

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.