We often hear the term annuity when we avail of loans like mortgages for our homes, long term loans or get our retirement income. But do we really know exactly what is an annuity? For people who had formal studies in business or finance, this is not a question. However, for ordinary people who don’t really have such background, they most likely don’t know what exactly is and annuity. To understand the term better, we should know where the term exactly originated and where it is usually used.
Annuity refers to a series of fixed periodic payments that are paid to you or to whom you got borrowed funds from. Usually, a financial contract is present in this kind of transactions. The term annuity originated from the Latin word annuus which means yearly. However, and annuity doesn’t necessarily mean that payments are only made every year but it can also be monthly, semi-annual or annual. Today, the term annuity is common when availing for insurance policies. There are different types of annuity and some of these are fixed, variable, straight, deferred, joint and refund.