Annuities

Parties to an Annuity

Annuitant, owner and beneficiary

Refund Life Annuities

Cash refund and Installment refund

Annuity Investment Options

Fixed and Variable

Indexed Annuities

Fixed annuities that aim for higher returns in the market. Insurer keeps initial return but gives annuitant the excess amount.

Life Contingency Options

Pure life and Life with guaranteed minimum

Variable Annuity Characteristics

Underlying investment, interest rate and license requirements

Annuity

a contract that provides income for a specified period of years of life. Protects a person from outliving their life. NOT life insurance. Do not pay face amount at death of annuiant

Annuity period

after the accum. period the sums from the previous period are made into a stream of income payments to annuitant

Fixed amount installments

annuitant selects how much each payment will be and insurer determines how long they will pay

Surrender Charge

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

Multiple Life

cover 2 or more lives. most common are joint life and joint and survivor.

Single Life

cover one life. contributions can be made periodic or single. Provides highest monthly payment.

Interest Rate

issuing insurance company does not guarantee a minimum interest rate

Periodic payments

level premium - the annuitant/owner pays a fixed installment flexible premium - the amount and frequency of each installment varies

Single payment

lump sum

Underlying Investment

payments not invested into general account, not invested in the insurance company's portfolio

Joint Life

payout arrangement where two or more annuitant receive payments until the first death among the annuitants and then payments stop

Beneficiary

person who receives annuity assets if the annuitant dies during the accumulation period

Annuitant

person who receives benefits or payments from the annuity, life expectancy is taken into consideration and is who the annuity is written for. Typically the owner but does not have to be. Annuitant must be a natural person

Annuity Purpose

provide income for retirement and also to liquidate ab estate. Agents should recognize the suitability of certain products for certain applicants

License Requirements

seller must have securities license and life insurance license

If annuitant dies during accumulation period...

the insurer is obligated to return the cash value or the premium paid, which ever is GREATER

Accumulation period (pay-in period)

the period of time over which the owner makes payments into the annuity. Payments earn interest on a tax-deferred basis.

Pure Life (life only or straight life)

this payment ceases at the annuitant's death, no matter what. Provides the highest monthly benefits. No guarantee all proceeds will be payed out.

Fixed annuity

guaranteed minimum rate of interest, income payments are fixed, time period and amount are specified by the insurer. Level benefit Payment Amount. Inflation is a downfall. Insurer bares the investment risk. Payments are based on the performance of the insurance company. Guaranteed Minimum (3%)

Joint and Survivor

guarantees an income for two that neither can outlive.Reduced payment after 1st recipient dies.

Deferred Annuity

income payments begin sometime AFTER 1 year from date of purchase. Either funded through single or periodic payments

Immediate Annuities

purchased in a single payment and provides income payments to start within one year from date of purchase. As early as one month. Single Premium Immediate Annuity

Annuity Income Amount is based on...

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

Life with guaranteed minimum (refund life)

if annuitant dies before the principal amount has been paid out, remaining amount will be refunded to the beneficiary. All proceeds will be paid out.

Owner

purchaser of the annuity contract, not always the one who receives the benefits. Owner owns all of the rights (naming the beneficiary, and surrendering annuity.

Annuities Certain

short term annuities that limit the amounts paid to a certain fixed period or until a certain fixed amount is liquidated. If owner dies beneficiary continues to receive payments

Fixed period installments

the annuitant selects the time period for the benefits, and the insurer determines how much each payment will be

Life with period certain

the annuity payments are guaranteed for the lifetime of the annuitant and for a specified period of time for the beneficiary