Annuities

Pure Life Annuity

A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors. highest monthly benefits

Beneficiary

One who receives benefits from the annuity if the annuitant dies during the accumulation period

Cash Refund

The type of refund is available to the beneficiary of an annuitant which will pay the refund in a lump sum? beneficiary will receive the original amount less any benefit payments already made to the annnuitant

Joint and Survivor annuities

Type of annuity that is based on the lives of two or more annuitants - and Annuity income is paid until the death of the last annuitant

variable annuity

annuitant may receive varying rates of return on the funds that are paid into the annuity; developed to provide a hedge against inflation; premiums invested in securities; separate account that is usually invested in common stocks premiums paid during the accumulation period are place in a separate account that is invested in common stocks

level benefit payment amount

during the payout phase of a fixed annuity the amount of benefit is also guaranteed. int itmes of inflation the benefit payment will have less purchase power and in times of deflation the benefit payment will have more purchase power

Deferred Annuity

either purchased with a single, lump sum Single Premium DA or through periodic payments Flexible Premium DA , grow tax deferred income payments begin some time after 1 year from the date of purchase. (10 OR 20 OR 65), often used to accumate funds for retirement, owner will receive the current interest rate or the guaranteed interest rate whichever is higher

guaranteed minimum

insurer is obligated to pay the guanteed rate usually 3%

SPDA Single premium deferred Annuity

is purchased with a lump sum, but payment of benefits not paid until after one year or more has lapsed

FPDA Flexible premium deferred Annuity

is purchased with multiple payments that can vary from year to year( e.g. a portion of each paycheck) and the benefits begin sometime after one year from the date of purchse (e.g. payouts start at 65)

Waiver

of surrender charges if the annuitant is confined to a long term facility for at least 30 days

Annuitant

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

SPIA - Single Premium Immediate Annuity

purchased with single, lump sum payment and provides income payments that start within 1 year from date of purchase

fixed period installments

the annuitant selects the time period for the benefits the insurer determines how much each payment will be based on the value of the account and future earnings projections - pays for a specified amount of time only

Owner

the oerson who purchases the contract, but does not have to be the one who receives the benefits

Installment refund opiton

when the annuitant dies the annuitants beneficiary will continue to receive guaranteed installments until the entire premium amount has been paid out

Annuities certain

short term annuities that limit the amounts paid to a certain fixed period or until a certain fixed amount is liquidated

Annuity income is based on

the amt of premium or cash value accumulated, the frequency of the payment, interest rate, and annuitants age and gender.

assets in a separate account

1 operations and investments of any separate account are subject to periodic examinations by the department 2 variable annuity separate accounts are required to establish the reserve liability in accordance with the department requirements 3 all income, gains, losses ona separate account must be credited to or charged against the amount allocated to that account 4 insurers are required to balance the separate accounts by adjusting any deficit through tranfers from unallocated surplus reserves. the assets should be equal to its liabilities.

Refund Life annuities

Provides annuity payments for the annuitant's lifetime with the guarantee that in no event will total income be less than the purchase price of the contract. If the annuitant dies before receiving this amount, the difference is paid to a named beneficiary either as a cash refund or in installments.

Market value adjusted annuity

a single premium deferred annuity that allows the owner to lock in a guaranteed interest rate over a specified maturity period anywhare between 3-10 yrs. penalties for surrender are based upon current interest rates at the time of surrender

equity indexed annuities

a type of fixed annuity that offer the potential for higher credited rates of return than their traditional counterparts but also guarantee the owner the minimum interest rates.

Bail out provision

allows the contract holder, in the event that interest rates drop a specified amount within a specified time frame to surrender the contract without charge

How are annuities classified?

by the method used to fund the annuity the date the annuity payments begin underlying investment configuration of the annuity

Multiple life annuities

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

Single life annuities

cover one life. provides the highest monthly payment

no transfer of assets may be made by a company between any of its separate accounts except for:

establishing a separate account conducting the business of a separate account in accordance with the provisions of a variable annuity contract making necessary adjustments for mortality experience or expense cost transferring to the general accountany amount in excess of the reserve liability held in a separate acct in special cases the dept may authorize other transfers - if such transfers would be in best interests of all involved

Annuity benefits

if annuitant dies during the accumulation period, the insurer is obligated to return to the beneficiary either the cash value or the premiums paid whichever is greater. If the beneficiary is not named the benefit will be paid to the estate of the annuitant.

Accumulation period

pay-in period; period of time over which the annuitant makes payments (premiums) into an annuity; period of time during which the pymts earn interest(tax deferred) and grow

fixed amount installments

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

Annuity period

annuitization period, liquidation period, pay-out period; time over which the sum that has been accumulated during the accumulation period is converted into a stream of income pymts to the annuitant

fixed annuity

guaranteed min rate of interest to be credited to the purchase pymt or pymts; income pymts that do not vary from one pymt to the next; insurance company guarantees the specified dollar amt for each pymt, and the length of the period of pymts as determined by the settlement option chosen by the annuitant

Life with Period certain

An annuitant will receive payments for a specified number of years (such as 10) or for the rest of her life, whichever is longer. If the annuitant dies before all the guaranteed payments have been made, the beneficiary receives the payments for the rest of the certain period. The period certain is designed to eliminate some of the risk, but the longer the period certain is, the lower the annuitants monthly payments will be!

Joint Life annuities

Payments continue to two annuitants for only as long as both live. Payments stop entirely when the 1st annuitant dies. There is no survivorship, so monthly payments would actually be higher to the annuitants on a Joint Life Annuity than they would be on a Joint & Survivor Annuity, which pays until the last party dies.

Surrender charges

a charge is levied against the cash value when the owner of an annuity prematurely surrenders the deferred annuity. When funds are borrowed. The surrender charge is generally a percentage that reduces over time. At surrender the owner gets their premium + interest -minus surrender charge.

Annuity

a contract that provides income for a specified period of years. Protects a person from outliving his/ her money. Not life insurance but rather a vehicle for the accumulation of money and the liquidation of an estate.

Nonforfeiture

a deferred annuity has a guaranteed surrender value that is available if the owner decides to surrender the annuity prior to annuitization (e.g. 100% of premiums paid - any prior withdrawals - related surrender charges.