What is an annuity due?

An annuity due may arise due to any recurring obligation. Many monthly bills, such as rent, car payments, and cellphone payments, are annuities due because the beneficiary must pay at the beginning of the billing period. Insurance expenses are typically annuities due as the insurer requires payment at the start of each coverage period.

What are examples of annuity due payments?

Examples of annuity due payments include rentals, leases, and insurance payments, which are made to cover services provided in the period following the payment. The annuity due can be illustrated as follows: The first payment is received at the start of the first period, and thereafter, at the beginning of each subsequent period.

What is the difference between annuity due and ordinary annuities?

The major difference between annuity due and the more popular ordinary annuity is that payments for an ordinary annuity are made at the end of the period, as opposed to annuity due payments made at the start of each period/interval. Ordinary annuity payments include loan repayments, mortgage payments, bond interest payments, and dividend payments.