Annuities (Life)
Other Life Income Payment Options: #4 Joint Life Income Option (A) joint survivor
- income is paid until the second of the two annuitants dies. - the second survivor can earn the same or less after the first person dies
current declared rate
- subject to change - When the annuity is first issued, this declared rate is called the contract's initial interest rate.
Fixed Annuity Annuitization
- the funds are converted into fixed (level) periodic payments. - distributed based on the payout option the owner selected.
Annuity serves two purposes
1. It can accumulate cash. 2. It can distribute income of a guaranteed amount for a guaranteed period.
What fixed annuities guarantee
- principal protection, - minimum interest rates, - a fixed level of lifelong annuitized payments, and - a death benefit.
What type of annuity option pays income over a set number of years or in specified amounts?
annuity certain income option
Which of the following is used to determine the amount of monthly income a fixed immediate annuity would provide per $1,000 of premium?
annuity purchase rate
Equity-indexed annuities are generally considered
Equity-indexed annuities are generally considered
Uses of Annuities
They can be used purely as a means to regularly distribute a given sum of money (immediate annuities). Or, they can be used to accumulate funds on a tax-deferred basis for future use (deferred annuities).
Liquidity Provisions and Riders #2 terminal illness rider
This rider waives surrender charges if the annuitant incurs a terminal illness. In most cases, death must be expected within one year of diagnosis.
Annuity purchase rate
amount of ongoing income that every $1,000 of a contract's accumulated value provides
In a fixed annuity, what is the second interest crediting rate called?
renewal rate
Frank is a 70-year-old owner/annuitant of a $300,000 variable annuity contract. He wants to annuitize this contract under a straight life option. Assuming that an annuity purchase rate of 5 percent AIR for a straight life income stream for a 70-year-old man is $6.50, what is the amount of Frank's first income payment under that payout option?
$1,950 Applying his contract's purchase rate to an income payout option produces $1,950 ($6.50 X 300). That is Frank's first income payment from the contract.
Special Variable Annuity Riders #1 guaranteed minimum accumulation benefit (GMAB) rider
- A GMAB rider guarantees that the VA's accumulated value will be at least equal to the sum of premiums paid after a specified period of time (typically five to ten years) minus previous withdrawals.
Other Life Income Payment Options: #4 Joint Life Income Option
- Annuitized payments can be designed to extend over more than one life - two common types: joint survivor, and joint life.
Insurance Aspects of Annuities
- As an investment product, annuities can be used to accumulate a sum of money for future distribution. - As an insurance product, they provide protection in the form of guaranteed death benefits and can provide a lifelong stream of income if the product is annuitized.
Main Life Income Payment Options
- Can be based on life contingency: payments last as long as the annuitant lives OR - based on the length of the joint lives of two or more annuitants OR- settlement options can also be paid on a certain basis, under which either the term or the amount of the payments is fixed. OR - combine a life contingency and a period certain
determining the payment amount of each payment: step 3
- Convert the first annuity payment amount into a set number of annuity units.
determining the payment amount of each payment: step 4
- Determine future annuity payment amounts by multiplying annuity units by the current NAV.
determining the payment amount of each payment: step 1
- Determine the assumed interest rate (AIR). - interest rate at which the undistributed funds will grow while income payments are being distributed - The AIR is the rate of return that the contract's values are assumed to earn over the annuitization period. - Insurers let the contract owners select the rate, and usually offer a couple rates to choose from - Based on the AIR and the payout option selected, the annuity purchase rate is determined
EIA Participation Rate
- EIA participation rate is the percentage of the index increase that is actually credited to the annuity. Usually range from 60-90%
Impact of AIR on Future Annuity Payment Amounts
- Future changes in the annuity payment amount are influenced by the assumed interest rate as well as changes in the subaccount net asset value - A higher AIR produces a larger initial payment but requires a higher investment return to maintain the payment amount. - A lower AIR produces a lower initial payment but more easily enables the contract to generate the same or higher future payments.
Deferred Annuity Death Benefits
- If a deferred annuity owner or the contract's annuitant dies during the contract's accumulation stage, the contract's values are paid to the beneficiary as a death benefit. -
Suitability in Annuity Transactions Model Regulation adopted by the National Association of Insurance Commissioners (NAIC).
- It establishes a regulatory framework that makes insurers responsible for ensuring that annuity transactions are suitable, even if the insurer uses another party to supervise or monitor producer recommendations in the sale of annuities. (In other words, insurers are not exempt from suitability requirements simply because they outsource the monitoring process associated with this requirement.) - To the extent practical, it makes state annuity suitability standards consistent with the annuity suitability standards imposed by the Financial Industry Regulatory Authority (FINRA).
Individual Uses of Annuities
- Life annuities ensure that one's income cannot be outlived - All deferred annuities offer the guarantee of a death benefit, which is distributed if the owner or annuitant dies during the accumulation period - deferred annuities should be reserved for people who have long-term investment goals and time frames - withdrawals from annuities before the owner's age 59½ may be subject to a tax penalty.
Annuity Certain Income Options
- Options that do not include a life contingency pay benefits for a specified period of time, at the end of which payments stop even if the annuitant is alive.
All of the following statements about an insurance company's general account are correct
- Premiums for a company's guaranteed products are deposited into the insurer's general account. - Premiums deposited to the general account are invested by the company in safe, secure investments, including long-term bonds and mortgages. - Premiums in the general account are invested in fixed interest securities, enabling the insurer to predict its level of investment returns and earnings.
single premium immediate annuity
- SPIA Bought to regularly distribute income. A person who buys an immediate annuity exchanges a lump-sum amount for money for a series of monthly income payments
Regulation of Variable Annuities
- The Securities Exchange Commission (SEC) is responsible for regulating the securities that make up an insurer's separate account. - FIN Regulates producers who sell variable insurance products
Variable Annuity Accumulation Units
- The growth of a variable annuity's account value during its accumulation period is measured in terms of accumulation units. - When the annuity owner makes premium payments and allocates them among the contract's subaccounts, they are used to buy accumulation units. - At any point in time, a variable contract's account value is equal to the total number of accumulation units multiplied by the NAV at that moment.
EIA Minimum Interest Rates
- The minimum interest guarantee (which is usually around 3 percent) provides the assurance that EIA's principal is secure and the account value will grow by a minimum amount. (Because of this protection of principal - The typical term of most EIAs on the market today is five to seven years. At the end of the term, the accumulated values can be taken free of surrender charge. Or, they can be left in the contract and the contract can be continued for another term.
Deferred Annuity Values Are Nonforfeitable
- They are not forfeitable, even if the owner stops making premium payments. - values can be left intact within the contract or withdrawn (in whatever amount) before the contract annuitizes - owners commonly do not annuitize their contracts. Instead, they take their accumulated values through withdrawals or full surrender of the contract.
Other Life Income Payment Options: #4 Joint Life Income Option (B) joint life
- income is paid to two or more annuitants until the first one dies. - after that the payouts end
determining the payment amount of each payment: step 2
- Use the AIR to calculate the first annuity payment amount. - After calculating the first month's payment amount (using the selected AIR), the payment amount is converted into annuity units. - number of annuity units is fixed, their value will vary over the annuitization period just as the net asset value of each subaccount continually changes - All future income payments amounts are determined by multiplying the annuity units by the current NAV
Variable Annuity Annuitization
- Variable annuity contracts usually give contract owners the choice of annuitizing the contract under a fixed or variable settlement option. - under a variable annuity contract provides for income payments that are not fixed, like a fixed annuity. -, these income payments change in response to the performance of the contract's underlying subaccounts. - payout options the same as fixed annuity
Market-Value Adjusted Annuities
- adjusted annuity offers an interest rate adjustment feature that makes it possible for the MVA contract value to lose money if the contract is surrendered before the end of its term. - issued with a fixed current interest rate that is set for a specified period of time that may range from one to ten years. - Funds withdrawn before a contract period ends are subject to a market-value adjustment as well as a surrender charge
Deferred Annuity Premium Payment Options: #3 Flexible Premium Deferred Annuity
- allow owners to make premium deposits of any amount whenever they want. - minimum required sometimes
Annuity: Beneficiary Contract #1 - Annuitant driven contracts
- annuitant's death before annuitization triggers payment of the contract value to the beneficiary even if the owner is still alive - beneficiary becomes the new owner and will choose a new benefitiary
fixed annuity
- annuity contract in which the insurer guarantees both the annuity principal and a specified rate of interest to be credited to the contract. - guarantees are backed by the financial strength and claims-paying ability of the insurer issuing the contract. - provide the peace of mind that all future values are guaranteed - guarantee the interest rate because premiums are invested in the insurer's general account.
Deferred Annuity Surrender Charges
- applied if the owner takes withdrawals from or surrenders the contract within a specified period of time after buying the annuity. - typically defined as a declining percentage of the contract's accumulated value. - Once the surrender charge period has ended, no charges are imposed on future withdrawals or surrenders.
two types of annuity suitability training for producers who sell annuities:
- carrier-specific training in which insurers provide product training for any producer selling their annuity products - industry-specific training that requires producers to complete a one-time annuity training program (minimum four hours) provided by an approved education provider
Fixed Annuity Death Benefits
- contract owner or annuitant dies during the accumulation period. - death benefit equals the contract's accumulated value when the death occurs. - not received tax free (unlike life insurance)
Deferred Annuities
- contract under which annuitization is delayed until a future date -funds accumulate interest on a tax-deferred basis -- may be funded under one of several premium options
What does the annuity owner have the right to during the accumulation stage
- decide on the annuity starting date, which is the date on which income benefits are scheduled to begin; - choose or change the income payout option before the annuity starting date; - name the annuitant and the beneficiary; -receive some or all of the cash value in a partial or complete surrender of the contract - assign the contract.
Group Annuities
- employer sets up a group annuity plan that provides annuities to its employees when they retire. - The contract states the monthly payout amount to be made.
Annuity Riders #3: return of premium rider
- ensures that the annuitant will get back at least the amount paid for the premium.
Annuity Riders #1: guaranteed income rider
- ensures that the annuitant will receive a regular payment every month, quarter, or year from the deferred annuity, without having to annuitize the contract. - annuitant funds it with a single lump-sum premium from which payments are made. - help provide retirement income for the annuitant without irreversibly committing funds through annuitization. - Has an annual fee
4 product designs of annuities
- fixed annuities - variable annuities - equity-indexed annuities - market-value adjusted annuities
Other Life Income Payment Options: #3 Life Income with Period (Term) Certain
- guarantees that income is paid for the length of the annuitant's life, but for no less than a certain number of years - If the annuitant dies before the selected term period ends, then income payments continue to his or her beneficiary for the balance of the period.
Two-Tiered Fixed Annuities
- has a higher level of interest crediting than most declared-rate fixed annuities, provided the contract owner keeps the product and chooses to annuitize it. - a lower rate is applied if the contract owner surrenders the annuity and takes its values in a lump sum instead of annuitizing
Annuity Riders #2: death benefit rider
- if an annuitant dies before annuity payments begin, or soon after the distributions begin, a beneficiary will receive at least the balance of the premiums paid - cash can be given to benefitiary in a lump sum or over time.
Fixed Annuity Accumulation
- immediate or deferred contracts - funded with either fixed premiums ( retirement annuities) or flexible premiums - The contract will never be credited with less than the guaranteed interest rate.
"Insurance against living too ling"
- include a mortality charge that effectively serves as an insurance premium. It protects the insurer in the event the annuitant lives beyond his or her life expectancy. - These guarantees assure annuitants they cannot outlive their income
Annuity Certain Income Options #2: Fixed Amount Payout Option
- income payments for as long as it takes to entirely liquidate the annuitized principal. - owner chooses a monthly amount, then insurance company decides how long it takes to liquidate that amount - if owner dies, the same payments are given to beneficiary until the amount is liquidated
EIA Rate Cap
- maximum interest rate that is applied to the funds in the EIA if the percent of change in the index is greater than the cap - This is true regardless of whether the participation rate applied to the index increase produces a higher rate
Types of charges and fees common to variable annuities
- mortality and expense (M&E) costs—These are the insurance-related costs for a variable annuity. They cover the cost of the contract's death benefit. - fund management fees—These charges cover the cost of managing and administering the separate subaccount investment portfolios. - annual contract fee—This charge is assessed every year by the insurer. It covers the cost of administering and handling the contract.
Nature and Purpose of Annuities
- opposite of life insurance. Life insurance CREATES an estate. Annuities LIQUIDATE an estate. -how it works--a sum of money called the principle is invested into an insurance company. At the later date the money is liquidated to provide an income that cannot be outlived
Annuity: Beneficiary Contract #2 - Owner-driven contract
- owner's death before annuitization triggers payment of the contract death benefit to beneficiary - Even if the annuitant is still alive - annuitant has no expectation of pre-annuitization benefits
Other Life Income Payment Options: #1 Straight Life Income
- payments are made for the annuitant's lifetime, regardless of how long that may be - largest monthly income payment for a given amount of annuitized funds. - contract ends when annuitant dies
Annuity Certain Income Options #1: Fixed Period Payout Option
- payments are made for the specified number of years and then end - the longer the payout period and the lower the interest paid by the insurer, the smaller the amount of each monthly payment - If the annuitant dies during the period, income continues to the beneficiary for the remainder of that period.
Other Life Income Payment Options: #2 Life Income with Refund Guarantee
- pays the annuitant an income for life no matter how long he or she lives. - If the annuitant dies before total income payments equal the annuity's annuitized sum, the refund guarantee option provides that the balance is paid to the designated beneficiary. - paid to the beneficiary in lump sum or installments until $0
Annuity: Beneficiary
- person the owner chooses to receive the contract's values if either the owner or the annuitant dies before annuitization - can be the annuitant - 2 types of contracts: annuitant-driven and owner-driven. (only is the annuitant and owner are different people) - person the owner chooses to receive the contract's values if the owner or annuitant dies before annuitization.
All of the following are accurate reasons for not using deferred annuities for short-term accumulation goals
- possible surrender charges upon distribution - possible immediate taxation of gain upon distribution - possible penalty tax upon distribution
EIA Death Benefits
- provide a death benefit if the annuitant or contract owner dies before the contract annuitizes. - The death benefit is usually specified as either the contract's accumulated index value or the guaranteed minimum value—whichever is higher
Variable Annuity Death Benefits
- provide for a death benefit if the owner or annuitant dies before the contract's funds are annuitized. (same as fixed annuity) - death benefit will equal r be greater than the premiums paid into the policy (less any withdrawals) or the contract's accumulated value at the time of death.
Uses of Annuities in Qualified Retirement Plans
- purchased by employer, then they set up a deferred annuity to fund plan -If a deferred annuity is used to fund a qualified retirement plan, then the premiums are tax deductible by the plan owner or sponsor.
Immediate Annuities
- purchased with a single sum of money to immediately begin distributing periodic payments. - only to distribute income, not purchased for accumulation - exchanges a lump-sum amount of money for a series of monthly, quarterly, semiannual, or annual income payments. - guaranteed steam of income beginning one payment cycle
what happens at the end of Market-Value Adjusted Annuities
- renew the contract term to stay with the same rate (likely if the contract rate is higher than current rates), - move to another contract period with an adjusted current rate (likely if the contract rate is lower than current rates), or - withdraw funds without a surrender charge.
Deferred Annuity Premium Payment Options: #2 Fixed Premium Deferred Annuity
- retirement annuity - not SPDA, not fixed - premiums of a set amount - not that popular anymore
Variable Annuities
- similar to variable life insurance - no guarantee as to the annuity principal or the credited interest rate - variable annuity premiums and contract values are invested in the insurer's separate account instead of its general account. - contract value move up or down depending on associated stock, bond, and money-market portfolio subaccounts. - can be bought as either immediate or deferred annuities. Most variable annuities sold today are deferred annuities.
Deferred Annuity Premium Payment Options: #1 Single Premium Deferred Annuity
- single lump-sum payment. - his money grows within the contract until the owner accesses the funds or the contract annuitizes.
Bailout Provision
- some deferred annuities - allows surrender charge-fee withdrawals if the interest rate credited to the accumulated values drops below a specific level - Some deferred annuities also permit the contract owner to withdraw funds from the contract at any time, without a surrender charge, if the owner becomes terminally ill or requires long-term nursing care. These are sometimes called medical bailout provisions.
Payout options for fixed annuity and variable annuity
- straight life - life with period certain - joint life - fixed period/fixed amount and so on
A change in the net asset value (NAV) of a variable annuity subaccount will change all the following
- the number of accumulation units that would be acquired through a premium payment to that subaccount - the accumulated value of that subaccount - the deferred annuity's total accumulated value of all subaccounts
Annuity Owner
- the person (or entity) who buys the contract. -They control the contract and make the premium payments - enjoy the benefits of tax-deferral during the accumulation stage.
Equity-Indexed Annuities (Indexed Annuities)
- tied closely to the performance of a stock index, but they are not variable contracts. - allow contract owners to participate in some of the growth in the stock market while avoiding possible losses to principal. how: linking the interest return to the growth of an equity (stock) index, and providing for a guaranteed minimum rate of return for the length of the contract. - EIAs are commonly linked to the S&P 500 or a Dow Jones Index. - the percent of change in the selected stock index forms the basis for determining the percentage interest rate credited to the funds in the EIA.
Individual Uses of Annuities (main reasons)
- to accumulate retirement savings - to pay out retirement funds on a periodic basis for a period that can be guaranteed to last as long as they do
Use Annuities to Fund Life Insurance
- use a portion of the annuity income payment to purchase life insurance. - the life insurance can be used to provide the beneficiary with a potentially substantial sum of money which itself can be converted into lifetime income. - use the taxable portion of the annuity to fund the life insurance purchase. uses money that will be taxed to pay for a life insurance death benefit
Guaranteed Minimum rates
- usually in the range of 2 to 3 percent compounded annually, exist for the life of the contract.
Accumulation units
-The growth of a variable annuity's funds or value during its accumulation period is measured in terms of accumulation units. - Accumulation units are equal to the subaccount's net asset value, or NAV
Annuitant
-person upon whose life the annuity payment amount and duration is based - owner can choose if this is recipient of the annuity payments - must be a natural person - The owner may name two people as joint annuitants. If two people are named jointly, then their joint life expectancy is the basis for determining the annuity payment amount and duration.
2 Phases of annuity
1. Annuity Accumulation Period= money is deposited into annuity upon the annuitization no more money is deposited into the annuity and the payout period begins. 2. Annuity Payout Period=The annutiant receive periodic income payments for life.
4 steps determining the payment amount of each payment
1. Determine the assumed interest rate (AIR). 2. Use the AIR to calculate the first annuity payment amount. 3. Convert the first annuity payment amount into a set number of annuity units. 4. Determine future annuity payment amounts by multiplying annuity units by the current NAV.
Why annuities are called "insurance against living too long"
1. The insurer can provide a guaranteed stream of income for a single life or for a joint life, based on life expectancies and its mortality experience. 2. The insurer guarantees income payments for whatever annuity payout period the annuitant selects. 3. Annuities provide income payments that annuitants cannot outlive even if they surpass their life expectancy.
Insurance companies that offer a declared-rate fixed annuity manage two interest rates with their fixed deferred annuities:
1. a guaranteed minimum rate (which is stated in the annuity contract) 2. a current declared rate (which is subject to change periodically)
Who does the annuity involve?
1. owner 2. annuitant (who may or may not be the owner) 3. beneficiary 4. Insurance company
Example of Variable Annuity contract
A simple example will illustrate this important aspect of variable contracts. Jean buys a variable annuity and directs her $2,500 premium deposit into the contract's blue-chip stock subaccount. She does this at a time when each accumulation unit (i.e., NAV) in that subaccount is valued at $10. This means that Jean bought 250 accumulation units of that subaccount ($2,500 ÷ $10 = 250). One year later, because of the positive performance of the stocks in that subaccount, the NAV of the blue-chip stock accumulation unit rises to $12.20. As a result, the value of Jean's investment in that subaccount is now $3,050 ($12.20 × 250). If Jean decides then to invest her $2,500 annual premium into that subaccount, she would acquire 205 accumulation units ($2,500 ÷ 12.20). She would then own a total of 455 accumulation units in the blue-chip stock subaccount for a current value of $5,550.
Purpose of annuities
Annuities are popular financial products used to distribute a sum of money over an extended period of time. They are sold by life insurance producers and issued by life insurance companies, but annuities are not life insurance. - In fact, annuities serve a purpose that is just the opposite of life insurance. The purpose of life insurance is to create an estate (i.e., a sum of money). But the purpose of annuities is to liquidate a principal sum over a certain period. Annuities achieve this goal by converting a sum of money into a series of income payments.
Tax-Deferred Accumulation
Annuity cash values accumulate on a tax-deferred basis. This means that interest earnings and growth are not taxable to the owner while they accumulate in the contract. This tax-deferral feature is one of the main advantages to annuity ownership. The period during which funds are paid out in the form of periodic income payments is known as the annuity payout period. one of the unique features of an annuity is that it can guarantee income will be paid for any period the owner wants.
Special Variable Annuity Riders #2 guaranteed minimum withdrawal benefit (GMWB) rider
Contract owner can withdraw an amount at least equal to the sum of premiums paid. Annual withdrawals are usually limited to a specified percentage (e.g., 5 to 10 percent) of total premiums paid.
Annuity Contract Provisions and Riders
Deferred annuities include provisions and optional riders that give contract owners flexibility in choosing how to distribute accumulated funds.
Equity-Indexed Annuities (Indexed Annuities) example
For example, let's say that Long Life Insurance Company's equity-indexed annuity is tied to the S&P 500. When Earl bought his EIA with a $10,000 premium deposit, the S&P 500 was at 1000. At the end of the contract's first term one year later, the S&P was at 1100. This is an increase of 10 percent in the index. Therefore, the basis for the amount of interest to be credited to Earl's contract is 10 percent. However, the actual amount credited depends on the contract's participation rate and rate cap.
EIA Participation Rate example
If the participation rate for Earl's contract is 75 percent, then 75 percent of the 10 percent index increase (7.5 percent) is the amount of interest that is credited to his contract. For that period, Earl's contract was credited with $750 ($10,000 × .075).
Accumulation Period
In an annuity, the period during which premium funds are paid into the annuity contract. - Can be months to years - Annuitization begins the annuity's distribution period.
Annuitization
Process in which the funds in an annuity are turned into a series of ongoing, periodic payments
Liquidity Provisions and Riders #1 charge-free withdrawals provision
Some deferred annuities permit contract owners to withdraw a specified percentage (e.g., 10 percent) of the accumulated value annually without a surrender charge
While indexed annuities are fairly complex products, the basic concept is best described as which one of the following?
The percent of change in the selected stock index determines the interest rate credited to the funds in the indexed annuity.
Liquidity Provisions and Riders #3 disability rider
This rider allows the contract owner to withdraw funds without a surrender charge if the owner becomes disabled and remains so for a specified period of time (usually ranging from 60 days to one year).
Facts about annuity annuitization
Variable annuity income payments change in response to the performance of the contract's underlying subaccounts. The payout options for a variable annuity are the same as for a fixed annuity: straight life, life with period certain, joint life, period certain, etc. Determining the amount of each variable annuity income payment is very different from determining fixed annuity income payments.
Example of Fixed Annuity Annuitization
a contract might provide a 60-year-old male with a fixed annuity monthly payout of $4.50 per $1,000 of accumulated value under a straight life payout option. This means that a $100,000 annuity fund would generate $450 a month guaranteed for as long as this annuitant lives. Regardless of the annuity settlement option selected, fixed annuity income amounts do not change over the term of the income period.
Annuities
contract between a person (the annuity owner) and a life insurance company (the annuity issuer) to accumulate and distribute a sum of money.
Liquidity Provisions and Riders #4 long-Term care ride
contract owner can withdraw funds without a surrender charge if confined to a nursing home.
Special Variable Annuity Riders #4 guaranteed lifetime withdrawal benefit (GLWB) rider
contract owner receives a lifetime income without having to convert to an immediate annuity. This rider usually lets the owner access undistributed contract values in addition to the income payments already received, though doing so will diminish income withdrawals thereafter
Calculate Fixed Annuity Death Benefit
total premiums paid into policy + credited interest earnings - withdrawals and contract charges
Leo is annuitizing his $250,000 deferred annuity and has chosen a settlement option that will pay him $1,500 per month for as long as it takes to entirely liquidate the $250,000 principal plus interest, whether or not Leo is alive. Which annuity settlement option has Leo chosen?
fixed amount option - Under a fixed amount option, the contract owner chooses a monthly payment amount, and the insurer then computes how long it will take to liquidate the principal at the selected amount. Income payments are made for as long as it takes to entirely liquidate the annuity principal.
Liza is guaranteed to receive annuity payments for 15 years from a $150,000 annuity. Payments end in 15 years, but if she dies before the end of 15 years, income will be distributed to her beneficiary for the rest of the period. Under which annuity settlement option is Liza receiving payments?
fixed period
Variable Annuity Contract Charges and Fees
handled two ways: - They are either deducted from the premium payments before the payments are deposited into the separate subaccounts. - They are deducted from the values in the subaccounts.
Producer Qualifications to Sell Variable Contracts
producers must hold either a FINRA Series 6 or Series 7 registration, obtained by passing a FINRA exam and hold a valid life insurance license in the state(s) where they do business.
Special Variable Annuity Riders #3 guaranteed minimum income benefit (GMIB) rider
provides a guaranteed minimum life income regardless of the contract's accumulated value. It adds a growth factor that assures a guaranteed minimum account value. At a specified future date, the deferred VA may be converted to an immediate annuity that provides income payments based on the greater of the guaranteed minimum account value or the actual accumulated value.
Purpose of annuity payout period
to distributes funds in the form of guaranteed periodic payments over a time period selected by the annuity owner, throughout the annuitant's lifetime and even afterward.
Variable annuities
variable annuities invest funds in securities-based subaccounts that are not guaranteed
