An Annuity is an investment you make, either in a single lump sum or through installments paid over a certain number of years, in return for which you receive a specific sum every year, or every month either for life or a fixed number of years. Upon the death of the annuitant, or at the expiry of the period fixed for annuity payments, the invested annuity fund is refunded usually along with a small bonus.
Annuities differ from all other forms of life insurance in one fundamental way - They do not provide any insurance cover but offer a guaranteed income for a certain period or for life. Typically annuities are bought to generate income during one's retired life, which is why they are also called Pension Plans.
Annuities are an investment that offers you an income that you cannot outlive and provides a solution to the biggest financial insecurity of old age that you will outlive your income.