Annuities

Deferred annuity

either purchased with a single lump sum (single premium deferred annuities) or is purchased through periodic payments (flexible premium deferred annuities). Deferred annuities are unique in that they grow tax deferred. Often used for retirement

life with guaranteed minimum 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. This option is also called refund life. It guarantees that the entire principal amount will be paid out.

joint and survivor arrangement

modification of the life income option in that it guarantees an income for two recipients that neither can outlive.

surrender

owner gets the premium, plus interest (the value of the annuity), minus the surrender charge.

Accumulation period

period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred.

Single Premium Immediate Annuity

purchased with a single, lump sum payment and provides income payments that start within 1 year from the date of purchase. Typically, an immediate annuity will make the first payment as early as 1 month from the purchase date.

annuities certain

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

Installment Refund

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

Multiple life annuities

cover 2 or more lives. The most common multiple life annuities are joint life, and joint and survivor

Annuitization period

(annuity period) is the time during which accumulated money is converted into an income stream.

Pay-In Period

Another word used for Accumulation period

What is the only difference between cash refund and Installment refund?

Cash refund is in a lump sum

Payments to the Beneficiary

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. If a beneficiary is not named, the benefit will be paid to the annuitant's estate.

Bail-Out Provision

It 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.

Tax-Deferred Accumulation

The cost base represents the premium dollars that have already been taxed and will not be taxed again when withdrawn from the contract. The interest accumulated in an annuity is the tax base, but the taxes are deferred during the accumulation period.

fixed-period installments

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 specified amount of time only, whether or not the annuitant is living.

Flexible Premium Deferred Annuity (FPDA)

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

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. This option pays a specific amount until funds are exhausted, whether or not the annuitant is living.

In a Single Premium Deferred Annuity (SPDA)

the annuity is purchased with a single payment, but the benefit is not paid until after one year or more has elapsed

pure life, also known as life-only or straight life

this payment ceases at the annuitant's death (no matter how soon in the annuitization period that occurs). This option provides the highest monthly benefits for an individual annuitant. Under this option, while the annuity payments are guaranteed for the lifetime of the annuitant, there is no guarantee that all the proceeds will be fully paid out.

cash refund

when the annuitant dies, the annuitant's beneficiary receives a refund of the principal, or the original amount paid into the annuity minus benefit payments already made to the annuitant. This guarantees the return of the amount to purchase the annuity but it does not guarantee to pay any interest. The only difference between cash refund and installment refund is that cash refund is a lump-sum payment.

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.

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.

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.