Term Certain Annuity

AAA

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.

INVESTOPEDIA EXPLAINS '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.



VIDEO

RELATED TERMS
  1. Annuity

    A financial product sold by financial institutions that is designed ...
  2. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  3. Fixed Annuity

    An insurance contract in which the insurance company makes fixed ...
  4. Life Insurance

    A protection against the loss of income that would result if ...
  5. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
  6. Tax Deferred

    Investment earnings such as interest, dividends or capital gains ...
Related Articles
  1. Passing The Buck: The Hidden Costs Of ...
    Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of ...

  2. Explaining Types Of Fixed Annuities
    Bonds & Fixed Income

    Explaining Types Of Fixed Annuities

  3. An Overview Of Annuities
    Home & Auto

    An Overview Of Annuities

  4. What Is An Annuity?
    Retirement

    What Is An Annuity?

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center