DEFINITION of 'Annuity In Arrears'
An annuity that has periodic payments of either interest and/or principal that must be paid at the end of a set period of time. An annuity in arrears is one of the most common forms of annuities. They are also known as ordinary annuities.
BREAKING DOWN 'Annuity In Arrears'
Annuities in arrears are not marketed as such by most annuity carriers, but they do exist nonetheless. They get their name from the fact that the first full annuity payment is not due until the end of the first term. For example, an annuity that pays out a combination of interest and principal one month from the start of the payment period is an annuity in arrears.