Because it is the single-premium life annuity that most frequently comes to mind when annuities are mentioned and since this form requires the deposit of a substantial sum of money, most people have the impression that annuities appeal only to the wealthy. This is not at all the case. The range of the annuity�s usefulness is nearly as wide as that of the life insurance contract, and forms have been devised to fit virtually every conceivable need or circumstance.

The market for annuities is composed of two broad categories of individuals: those who have already accumulated an estate either through inheritance or by their own personal efforts and those who are seeking to accumulate an estate. The first category may be subdivided into the wealthy and those with only moderate resources.

Wealthy individuals purchase annuities as a hedge against adverse financial developments. Large estates can be wrecked through business reverses, unwise investments, and reckless spending. Insurance company records abound with cases of individuals who at one time were wealthy but whose fortunes melted away, leaving payments from annuities purchased in their more affluent days as their sole source of income. There are also numerous cases of individuals who are dependent on relatives for whom they had purchased annuities during a more solvent period. Wealthy people, then, purchase annuities in a search for security. To them yield is a secondary consideration.

Yield, on the other hand, is a primary consideration for those persons, mostly middle-aged and elderly, who have accumulated a modest estate and hope that it will be the source of financial security during the remaining years of their lives. The life annuity, perhaps in the joint-and-survivor form, is the answer to the problem of this group, since it maximizes income by including a portion of the principal in each monthly payment and promises a continuation of the benefit payments and some deferral of income taxes as long as the annuitant or annuitants live. Although some people in these circumstances are reluctant to invest their capital in an annuity because they want to leave an estate to their children or other close relatives, many parents feel that, having reared and educated their children, their greatest responsibility is providing for their own old-age maintenance, thus relieving the children of that burden. The annuity is an ideal instrument for accomplishing this objective.

Furthermore, there are situations in which the entire capital accumulation may not be needed to provide for the parents� old-age support. In such cases, a portion of the estate can be used to purchase an annuity of suitable form and size, making it possible for the remainder of the estate to be distributed to the children during the parents� lifetime, when it may be of the greatest use to the children. Most young people would probably prefer to receive a smaller share of their parents� estate when their need for capital is the greatest than to wait for a larger share when the need may be less urgent. Moreover, many parents, if they could safely do so, would prefer to distribute a portion of their estate to their children during the parents� lifetime so that they can witness the enjoyment it brings. Annuities can be used in a similar manner to provide living bequests to charitable, educational, and religious organizations.

The annuity is also an attractive savings medium for the person who has not yet accumulated an estate but wants to achieve financial independence in old age. Professional people find annuities especially attractive for that purpose. The same is true of athletes, entertainers, and others who enjoy a very large income but for a limited period of time. Annuities are an appropriate investment because they can be purchased through flexible periodic premiums or through single-premium deposits as the annuitant comes into possession of large sums.