Annuities
Joint and Survivor
the joint and survivor arrangement is a modification of the life income option in that it guarantees an income for two recipients that neither can outlive. After the first recipient dies, the surviving recipient receives a reduced payment.
General Account Assets
fixed annuity premiums are deposited into the life insurance company's general account.
Death Benefit
if an annuitant dies during the accumulation period, the insurer is obligated to return to the beneficiary either the cash value, or the total premiums paid, whichever is greater.
Cash Refund
when the annuitant dies, the beneficiary receives a lump sum refund of the principal minus payments already made.
Annuity Benefit Payment Options
annuity payment options specify how annuity funds are to be paid out.
Retirement Income
since annuities are a popular means to provide retirement income, they are often used to fund qualified retirement plans.
Single Vs Multiple Life
single life annuities cover one life, multiple life annuities cover 2 or more lives.
Required Provision
that apply to annuities are the same as those that apply to life insurance contracts, such as grace period, incontestability, entire contract, misstatement of age, and free-look period.
Variable Annuity - License Requirements
a variable annuity is considered a security and is regulated by the SEC. Agents must be registered with FINRA.
Education Funds
an annuity can provide savings on a tax-deferred basis for the education expenses of the annuitant.
Annuity
an annuity is a contract that provides income for a specified period of years, or for life. An annuity protects a person against outliving his or her money. It's a vehicle for the accumulation of money and the liquidation of an estate.
Variable Annuity - Interest Rate
issuing insurance company does not guarantee a minimum interest rate.
Variable Annuity - Underlying Investment
the payments that the annuitant invests into the variable annuity are invested in the insurer's separate account, not their general account.
Surrender Charges
the purpose of the surrender charge is to help compensate the company for loss of the investment value due to an early surrender of a deferred annuity.
Premium Payment Options
there are 2 options, a single payment or through periodic payments in which the premiums are paid installments over a period of time. Periodic payments can be either level premium meaning pay in fixed installment, or flexible premium in which the amount and frequency of each installment varies.,
Annuity Period
also known as the annuitization period, liquidation period, or pay-out period, which the sum that has been accumulated is converted into a stream of income payments to the annuitant. Period may last for the lifetime of the annuitant, or for a specified period.
Accumulation Period
also known as the pay-in period, is the period of time over which the annuitant makes payments into an annuity. Payments earn interest on a tax-deferred basis.
Types of Annuities
annuities can be classified according to how premiums are paid into the annuity, how premiums are invested, and how benefits are paid out.
Lump-Sum Settlements
annuities may serve as an ideal financial vehicle for someone who comes into a large lump sum of money.
Suitability in Annuity Transactions
Age, Annual Income, Financial and tax status, Investment objectives, Liquidity needs, Intended use, Financial Experience, and Risk tolerance.
Pure Life
the life annuity will pay a specific amount for the remainder of the annuitant's life. The payment ceases at the annuitant's death no matter how soon in the annuitization period that occurs. This option provides the highest monthly benefits.
Annuities Certain
are short-term annuities that limit the amounts paid to certain fixed period or until a certain fixed amount is liquidated.
Surrender Value
at surrender, the owner gets the premium plus interest (value of the annuity) minus the surrender charge.
Variable Annuities
a variable annuity 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.
Annuity Replacement
agent must consider, 1) incur a surrender charge, 2) lose existing contractual benefits, 3) tax penalty, 4) increased fees, 5) have replaced another annuity in the past 36 months, and 6) benefit from the enhancements.
Beneficiary
the person who receives annuity assets, either the amount paid into the annuity or the cash value, whichever is greater, if the annuitant dies during the accumulation period, or to whom the balance of the annuity benefits is paid out.
Annuitant
the person who receives benefit or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written. Must be a natural person.
Personal Use of Annuites
the principal use of an annuity is to provide income for retirement, however an annuity may be used for any accumulation of cash or simply to liquidate an estate.
Life With Guaranteed Minimum
under this settlement option if the annuitant dies before the principal amount has been paid out, the remainder of the principal amount will be refunded to the beneficiary.
Installment Refund
when the annuitant dies, the beneficiary will continue to receive guaranteed installments until the entire prinicpa amount has been paid out.
Fixed Amount
with 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.
Fixed Period
with 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 projection.
Guaranteed Minimum Withdrawal Benefit
with this option the annuitant can withdraw a maximum percentage of his or her investment annually until the initial investment has been recovered.
Nonforfeiture
a deferred annuity has a guaranteed surrender value that is available if the owner decides to surrender the annuity prior to annuitization.
Deferred Annuity
a deferred annuity is an annuity in which the income payments begin sometime after one year from the date of purchase.
Fixed Annuities
a fixed annuity provides the following; 1) guaranteed minimum rate of interest, 2) income payments that do not vary, and 3) the insurance company guarantees the specified dollar amount for each payment and the length of the period of payments.
Life With Period Certain
is another life contingency payout option. Under this option, the annuity payments are guaranteed for the lifetime of the annuitant, and for a specified period of time for the beneficiary.
Immediate Annuity
is one that is purchased with a single, lump-sum payment and provides income payments that start within one year from the date of purchase.
Interest Rate Guarantees
in fixed annuities the insurer bares the investment risk, and will pay either the guaranteed minimum rate (usually 3%) or the current market rate.
Annuity Income Amount
is based on, 1) amount of premium paid or cash value accumulated, 2) frequency of the payment, 3) interest rate and 4) annuitant's age & gender.
Equity Indexed Annuties
indexed or equity indexed annuities are fixed annuities that invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the indexed annuity has a guaranteed minimum interest rate.
Owner
the purchaser of the annuity contract, but not necessarily the one who receives the benefits, however the owner of the annuity has all the rights.
Joint Life
joint life is a payout arrangement where two or more annuitants receive payments until the first death among the annuitants, and then payments stop.
Accumulation Units
variable premiums purchase accumulation units in the fund, which is similar to buying shares in a mutual fund. Accumulation units represent ownership interest in the separate account. Upon annuitization the accumulation units are converted to annuity units, the income paid is based on the value of the units.
