3 Types of annuities

By Marcie Geffner - Bankrate.com

What, exactly, is an annuity?

The most basic definition is that an annuity is a contract between the annuity's owner and a life insurance company. Pursuant to the contract, the owner gives the company a sum of money and the company gives the owner the opportunity to receive a guaranteed stream of payments.

The sum of money might be as little as $2,000 or as much as $1 million or more. The payment depends on the type of annuity, interest rate, time frame, owner's age and add-ons, or "riders," the owner purchases, says Michael Kostelnik, a financial planner at Family Life Financial Planning in Mentor, Ohio.

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