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Simple English definitions for legal terms
ordinary annuity
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A quick definition of ordinary annuity:
An ordinary annuity is when someone agrees to pay a certain amount of money to someone else every year or month. This usually stops when the person receiving the money dies. An annuity can also be a savings account for retirement. There are different types of annuities, like a fixed annuity that guarantees a certain amount of money, or a variable annuity that depends on how well investments do. Some annuities continue to pay out to a person's spouse after they die, while others only pay out during the person's lifetime.A more thorough explanation:
An ordinary annuity is a type of annuity that makes payments at the end of each pay period. It is an obligation to pay a stated sum, usually monthly or annually, to a stated recipient. These payments terminate upon the death of the designated beneficiary.
For example, if someone purchases an ordinary annuity that pays $1,000 per month for 10 years, they will receive $1,000 at the end of each month for 10 years. If the annuitant dies before the 10-year period is up, the payments will stop and the remaining balance will not be paid to their beneficiaries.
Another example of an ordinary annuity is a mortgage payment. A homeowner makes monthly payments to the lender, and each payment includes both principal and interest. The interest portion of the payment is an example of an ordinary annuity because it is paid at the end of each month.
Overall, an ordinary annuity is a type of financial product that provides a fixed income stream over a specified period. It is important to understand the terms and conditions of an annuity before purchasing one to ensure it meets your financial needs.