This is an insurance contract whereby fixed payments are made by an insurance company to the annuitant for an agreed period of time normally until the annuitant dies. This is therefore a good financial instrument if you are looking forward to receiving a fixed income.
There are two main types of annuities: fixed annuities-which are life annuities and pay a certain amount of money until the death of the annuitant. Term certain annuities- whereby it pays a certain amount over a certain period of time until the expiry of the annuity product which can come even before the death of the annuitant.
There are several types of life annuities and are composed on the money invested plus the premium paid whereas term certain annuities pay a predetermined amount over a certain period of time no matter what will befall the annuitant in the course of the payment.