Annuity

To liquidate a sum of money by paying it out over time as income, typically for life — An annuity is essentially the reverse of life insurance: instead of creating a lump sum payable at death, it liquidates a principal sum plus interest over a period of time, typically for the annuitant's lifetime. The insurer assumes the risk that the annuitant will live longer than the funds would otherwise last, converting accumulated savings into a steady income stream. This liquidation function is the core concept underlying both the accumulation and distribution phases of the contract.

National insurance concept

An annuity protects against the risk of outliving one's income, while life insurance protects dependents against the financial loss of premature death — The two products hedge opposite mortality risks. An annuity converts accumulated funds into an income the annuitant cannot outlive, so it addresses longevity risk - the danger of living too long. Life insurance addresses premature death - the danger of dying too soon and leaving dependents without income or support. This distinction explains why annuities emphasize living-benefit payments and life insurance emphasizes the death benefit.

National insurance concept