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Lifetime annuity

A product paying a guaranteed income until death, transferring to the insurer the longevity risk the individual cannot manage alone.

Definition

The lifetime annuity converts accumulated capital into a guaranteed income until the insured's last day, whatever their longevity. It is the product of life insurance's demographic shift: the business now covers the risk of living too long rather than dying too soon. It does real social good. Left to themselves, retirees under-consume out of fear of running short or over-consume out of imprudence; the annuity guarantees them a lifetime income. But it exposes the insurer to longevity trend risk, which cannot be diversified away: an annuitant who lives longer receives more payments. An error on longevity changes sign here: a table that overstates deaths, prudent for a term life book, understates the payments to come and becomes ruinous on annuities.

Its 9 cross-references, woven across the glossary's 18 categories
Lifetime annuity: Insurance glossary illustration, AlgoPolis
Example

US annuity sales reached 464 billion dollars in 2025, a fourth consecutive record, driven by the demographic wave known as Peak 65.

Read next
Actuarial scienceTrend riskThe risk that a systematic, unforeseen improvement in longevity hits all annuitants at once. Non-diversifiable, it is the demographic equivalent of catastrophe.Read the entry →ReinsuranceLongevity riskThe risk that pension or annuity beneficiaries live longer than expected, one of the largest exposures in the world and the only one that resists securitization.Read the entry →Life & protectionGenerational mortality tableA table giving mortality specific to each year of birth, thereby building in expected longevity improvement instead of freezing it.Read the entry →
Sources
  • LIMRA, U.S. Individual Annuity Sales Survey, fourth quarter 2025 results (464.1 billion dollars in 2025, fourth straight annual record), as reported by InvestmentNews and Rethinking65
Related terms
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