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An insurance annuity contract is created when an individual gives an insurance company money which may grow tax deferred and then can be distributed back to the owner in several ways. Annuities have features of both life insurance and investment financial products. In the US, annuity contracts are only allowed to be sold by insurance companies, although private annuity contracts may be arranged between donors to non-profits to reduce taxes. There are two types of annuity contracts: the immediate annuity, which guarantees payments for a period of years or the lifetime of an individual or couple, and the deferred annuity, which grows tax deferred until such time as the annuity contract is converted into an immediate annuity or cashed in, either in periodic withdrawals or in a lump sum.
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