Definition - What does Immediate Annuity mean?
An immediate annuity is an annuity that starts paying out immediately after it is purchased. In order to obtain an immediate annuity, however, a large lump sum of money must be paid to the annuity provider.
In the context of insurance, many life insurance companies offer immediate annuities to their customers.
Insuranceopedia explains Immediate Annuity
The main benefit of an immediate annuity is that it starts to pay out right away.
It is common for immediate annuities to last for ten or twenty years. They can even last for the rest of a recipient's life if they choose to make it last that long. There is, however, a trade-off with these longer annuities: in general, the longer the payout period is designed to last, the more expensive the initial lump sum payment will be.
It is often possible to set up immediate annuities so that they provide benefits to two people.
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