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DEFINITION of 'Term Certain Annuity'

An insurance product that guarantees a periodic payment of a predetermined amount for a fixed term. Once the term has elapsed, these products are spent and offer no possibility of any future payments, even if the annuitant is still alive. Annuitants may choose to purchase these products gradually by making periodic payments, or they may make a purchase with a single lump sum payment. Usually, lump sum purchases are made at, or shortly after, the annuitant's retirement.

BREAKING DOWN 'Term Certain Annuity'

Term certain annuities make periodic payments to the annuitant over time, but once they're done, they're done. The main risk involved in purchasing a product like this is that you may outlive your annuity and be left with no money to live off of. For this reason, term certain annuities should only be purchased under the guidance of a reputable financial professional.

Because of the tax-deferred status of insurance products, many wealthy investors or above-average income earners choose to purchase term certain annuities for the tax advantages they offer.



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