annuities

types of annuities

premium payment options, immediate vs. deferred annuities, annuity investment options, annuity benefit payment options,

surrender charges

purpose is to help compensate a company for loss of the investment value due to an early surrender of a deferred annuity; at surrender the owner gets the premium plus interest

joint and survivor

payment to two or more annuitants and if one dies, the other still gets payments

variable annuities

serves as a hedge against inflation, and is variable from the standpoint that the annuitant may receive different rates of return on the funds that are paid into the annuity.

multiple life annuities

cover 2 or more lives. Two of the multiple life annuities are joint and survivor and joint life.

the parties

owner, annuitant, beneficiary

annuitant

The person who receives benefits or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written.

Interest Rate Guarantees

-during a fixed annuity's accumulation period, accumulated values earn a current rate of interest that is competitive with prevailing rates on other interest-bearing investments -current rate is generally declared at the beginning of the year & guaranteed for the year -current rate may rise or fall from year to year, but it will never be less than a guaranteed minimum rate that is stated in the contract

fixed annuities

A type of annuity that provides a guaranteed fixed benefit amount, payable for the life of the annuitant

life contingency

DEPANDANT UPON WHETHER OR NOT THE INSURED IS ALIVE

annuity investment options

Fixed annuities and variable annuities

IRS

internal revenue service a US government agency responsible for collecting of taxes and enforcement of the internal revenue code

long term care needs

Level of patient disability Availability of informal caregivers Financial circumstances Availability of public programs Personal circumstances

personal uses of annuities

On the individual level, an annuity is used to provide a future stream of income for the individual to serve as retirement income, or as a source of funding for higher education, such as through an Individual Retirement Annuity (IRA).

life contingency options

The payout options for annuitized income based on the life of one or more annuitants. A life contingent payout guarantees that income payments are made for as long as the annuitant lives, no matter how long that is

lump sum settlement's

Paying a settlement in installments over time rather than in a single lump sum When a settlement is paid in this manner it is called a "structured settlement" Often the structured settlement will be created through the purchase of one or more annuities, which guarantee the future payments

premium payment options

Single Premium — A lump sum payment is made into an annuity. Periodic Premium — Continuous premiums paid into the contract. Flexible Premium — Flexible contributions may be made as often and in whatever amount the contract owner desires. However, most insurers set a minimum and a maximum dollar amount they will accept.

fixed amount installments

The annuitant selects how much each payment will be, and the insurer determines how long the benefits will be paid by analyzing the value of the account and future earnings.

cash refund

When the annuitant dies, the beneficiary receives a lump sum refund of the principal minus benefit payments already made to the annuitant. Cash refund option does not guarantee to pay any interest

installment refund

When the annuitant dies, the beneficiary will continue to receive guaranteed installments until the entire principal amount has been paid out.

natural person

a human being

suitability

a requirement to determine if an insurance product or an investment is appropriate for a particular customer

qualified plan

a retirement plan that meets the IRS guidelines for receiving favorable tax treatment

license requirements

a variable annuity is considered a security and is regulated by the SEC in addition to state insurance regulations

L;IQUIDATION OF AN ESTATE

converting a persons net worth into a cash flow

annuity period

also known as the annuitization period, liquidation period, or pay-out period; time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant

deferred annuity

an annuity in which the income payments begin sometime after one year form the purchase date; can be funded with a single lump sum or through periodic payments ; the longer the annuity is... the more flexible for payment of premiums it allows

retirement income

annuities are often used to fund retirement plans which means they meet the IRS guidelines to receive favorable tax treatment

waiver

annuity contracts provide for a waiver of surrender charges if the annuitant is confined to a long term care facility for at least 30 days

life with period certian

another life contingency payout option; the annuity payments are guaranteed for the lifetime of the annuitant and for a specified period of time for the beneficiary;

acclimation period

as known as the pay-in period; the period of time over which the owner makes payments into the annuity

single life annuities

cover one life and annuity payments are made with reference to one life only; contributions can be made with a single premium or on a periodic premium basis with subsequent values accumulating until the contract is annuitized

indexed annuities

fixed annuities that invest on a relatively aggressive basis to aim for higher returns

general account assests

fixed annuity premiums are deposited into the life insurance company's general account; it is then comprised mostly of conservative investments like bonds; these investments are secure enough to allow the insurance company to guarantee a specified rate of interest as well as assure the future income payments that the annuity will provide

guaranteed minimum withdrawal benefit

guarantees that upon the policyholder reaching a certain age, a minimum withdrawal amount over a specified period will be provided

annuities certain

in contrast with life contingency benefit payment options; are short term annuities that limit the amounts paid to a certain fixed period or until a certain fixed amount is liquidated

joint life

is a payout arrangement where two or more annuitants receive payments until the first death among the annuitants and then payments stop

bail out provision

is found in some annuity contracts; it allows the contract holder in the event that interest rates drop a specified amount within a specified time from to surrender the contract with out charge

immediate annuities

is one that is purchased with a single, lump sum payment and provides income payments that start within one year form the date of purchase; typically will make the first payment as early as 1 month form the purchase date

interest rate

issuing insurance company does not guarantee a minimum interest rat

nonforfeiture

law stipulates that a deferred annuity must have a guaranteed surrender value that is available of the owner decides to surrender that annuity prior to annuitization

annuity benefit payment options

specify how annuity funds are to be paid out; they are very similar to the settlement options unused in life insurance that determine how the policy proceeds are distributed to the beneficiaries

fixed period installments

the annuitant selects the time period for the benefits, and the insurer determines how much each payment will be based on the value of the account and future earnings projections; this option pays for a specific amount of time only whether or not the annuitant is living

annuities principles and concepts

the parties, accumulation period vs. annuity period

underlying investment

the payments that the annuitant makes into the variable annuity are invested in the insurer's separate account, not their general account

beneficiary

the person who receives annuity assets if the annuitant dies during the accumulation period or to whom the balance of annuity benefits is paid out to

owner

the purchaser of the annuity contract, but no necessarily the one who receives the benefits; the owner of the annuity has all the rights, such as naming the beneficiary and surrounding the annuity; the owner of an annuity may be corporation trust or other legal entity

deferred

whit held or postponed until a specified time or event in the future