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