There are times when a single life annuity can make great sense, especially when the person who is purchasing the annuity is single or has no interest in passing along any annuity benefits to someone else. Keep in mind that an annuity is a form of insurance and is sold by insurance companies, generally speaking. Also, they are sold through an agent network of the insurance company guaranteeing the annuity.

Once that's understood, the next thing to realize about an annuity is that it can be an effective way to guarantee   
a steady stream of income for the life of the person who has bought the annuity (he or she is usually referred to as the annuitant). Usually, there are a couple of different ways to fund an annuity, which will begin paying out at some time predetermined by the annuitant and the company selling the annuity.

In the first, the prospective annuitant will make a lump sum payment to the insurance company with the expectation that payments will begin either immediately or at some point in the future. When those payments begin in the future, all interest and investment income earned from that lump sum payment will be paid out to the annuitant over the predetermined time set between the company and the annuitant.

When something like a single life annuity is arranged for, and paid for either through a lump sum or a series of payments by the annuitant over a predetermined length of time, payouts will commence at some point and will continue until the person holding the annuity passes away. At that point, all payments stop and any funds in the annuity will revert to the insurance company.

A single life annuity generally pays out higher rates because the insurance company expects to make money from funds left over in the annuity, which cannot be passed on to heirs by law because of the way the annuity is structured. Insurance companies are expert at determining life expectancy of any person taking out a single life annuity, and it is usually the case that they will end up with some funds reverting back to the company upon the death of the annuitant.

This isn't a bad thing, because a single life annuity – as was said – generally tends to pay out higher rates of return and is usually pegged to funds and other financial instruments that also generate a nice return on investment back to the annuity itself. This means that the company selling the annuity will be able to pass along even more income to the annuitant.

For those who have no problem considering their mortality and who are concerned about making sure they have a guaranteed rate of return from the annuity over their lives, this sort of investment vehicle can make a great deal of sense. There are a number of different types of annuities, and it is always a good idea to do a little research on not only what an annuity is but also how it is sold prior to contacting any agent for information.