An annuity is a financial agreement between a consumer and an insurance company. When purchasing an annuity, you are investing your money with an insurance company for a set period of time. In turn, the insurance company guarantees interest on your principal. Consumers have many options when it comes to annuity investments.

Annuities have become very popular in the investment world for a variety of reasons. To begin with, these investments can avoid probate by using a beneficiary designation for payout. For example, you can name your spouse, your children or a favorite charity as the beneficiary of the account at your passing.