What is a Single Premium Annuity?

Definition of a single premium annuity

A single premium annuity refer to an annuity that is purchased with a single premium (vs periodic premiums or installment premiums). It is a method of premium payment, not the type of annuity.

A single premium annuity is when you purchase an annuity (not matter what type) with a lump sum. In the past, annuities used to have to be purchased with a lump sum and they were all single premium annuities. However, nowadays it is more common to purchase an annuity on an installment basis.

What are the methods of purchasing an annuity?

There are two methods of purchasing an annuity:

1. single premium, and
2. installment premium

Some annuities can be purchased with either a single premium or installment premiums. The immediate annuity must be purchased with a single premium whereas a deferred annuity can be purchased with either a single premium or installment premiums.