Annuity Certain

What Does Annuity Certain Mean?

An annuity certain is a financial instrument used for retirement planning. It provides a stream of income for a predetermined number of years, paid to the annuitant or, if they pass away before full disbursement, to their estate. Annuity certain is one type within the wider category of annuities used to generate retirement income.

Payments from an annuity certain are made on a fixed and regular schedule, which can be monthly, quarterly, semiannually, or annually.

Insuranceopedia Explains Annuity Certain

An annuity certain differs from a life annuity. While both are investment vehicles designed to provide post-retirement income to the annuitant, a life annuity provides payments for the duration of the annuitant’s life, rather than a predetermined period. Although the life annuity guarantees payments for the annuitant’s lifetime, there is a risk that the annuitant may die relatively young and not receive a substantial return on their initial investment. In contrast, with an annuity certain, if the annuitant dies before the predetermined payment period ends, their estate or beneficiary can still benefit from the remaining payments. For this reason, owners of an annuity certain often review the same beneficiary rules that apply to a life insurance policy when deciding who should receive any payments left after their death.