Variable Annuities

taxation of annuities

-contributions made with AFTER-tax dollars

periodic payment deferred annuity

A periodic payment deferred annuity allows investments over time. Payments of benefits on this type of annuity are always deferred until a later date selected by the annuitant.

waiver of premium

Continuation of life insurance coverage if the insured becomes totally disabled and is unable to pay the premiums.

life with period certain

Guaranteed income for annuitants lifetime; and if the annuitant dies before the period certain has expired, the policy pays the beneficiary in periodic installments until the end of the designated period

combination annuity

In a combination annuity, the investor contributes to both the general and separate accounts, which provides for guaranteed payments as well as inflation protection.

variable annuity

Like fixed annuities, variable annuities guarantee a payment for life once the contract is annuitized. The insurance company still accepts the mortality risk for the client. However, unlike fixed annuities, the variable annuity contract does not guarantee the amount of the annuity payment or the performance of the account. The annuitant accepts the investment risk, not the company because this is a separate account. earning are tax deferred.

fixed annuity

investors pay premiums to the insurance company that are invested in the company's general account. The insurance company is then obligated to pay a guaranteed amount of payout , typically monthly , to the annuitant based on how much was paid in.

annuity

A contract sold by an insurance company that provides the investor with a series of regular payments.

joint life with last survivor

An annuity payout option that covers two or more people, with annuity payments continuing as long as one of the annuitants remains alive.

single premium deferred annuity

An annuity that is purchased with a single payment and benefit is NOT paid out until after more than one year from annuity purchase date best describes _____________ Annuities.

immediate annuity

An insurance contract purchased for a single premium that starts to pay the annuitant immediately following its purchase.

annuitization

At some point, the annuitant will begin to take income from the account. This is known as the annuitization of the contract. Technically, the value of the accumulation units is converted into a fixed number of annuity units. These annuity units are then liquidated to provide monthly income guaranteed for the life of the annuitant.

assumed interest rate

Rate of interest that an insurance company uses to project the payout on a variable ANNUITY contract. The higher the assumed interest rate, the higher the monthly payout will be.

life income

Under the ____________ Option, the amount of each installment paid is based on the recipients life expectancy and the amount of principal. If the beneficiary lives for a very long time, payments may exceed the total principal. However if the beneficiary dies shortly after he or she begins receiving installments, the balance of the principal is forfeited.

variable life insurance

WHOLE LIFE INSURANCE that allows the cash value of the policy to be invested in stock, bond, or money market portfolios. The policyholder bears the risk of the investment, while the insurance company guarantees a minimum death benefit. Earnings from variable life policies are tax deferred until distribution.

accumulation phase

the period of time by which the owner of the contract pays in to the annuity; a beneficiary must be named if the policy owner dies during the accumulation phase.