Annuities are contracts sold by life insurance companies. In their simplest form, one pays a sum of money (either a lump sum or a series of payments) and the insurance company makes periodic payments to the policy holder, beginning on the date contracted and continuing for the rest of the insured`s life. Unlike mutual funds or unit trusts, variable annuities have insurance provisions and guarantees to preserve the value of the principal paid into the annuity. They also generally carry higher fees than mutual funds.