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34 Cards in this Set
- Front
- Back
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Annuity |
A contract that provides income for a specified period of years or for life. |
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Annuities are a vehicle for |
the accumulation of money and the liquidation of an estate. |
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The owner of the annuity |
Is the purchaser of the annuity contract. The owner has all the rights. |
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The owner of an annuity can be |
corporation, trust or other legal entity. |
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The Annuitant |
The person who receives benefits or payments from the annuity, whose life expectancy is taken into consideration |
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The Annuitant must be a |
Natural person |
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Beneficiary |
The person who receives annuity assets |
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Accumulation period (pay-in period) |
The period of time which the owner makes payments into an annuity. Payments earn interest on a tax deferred basis. |
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Annuity period (annuitization period) (pay-out period) (liquidation period) |
The time which the sum has been accumulated and converted into a stream of income payments to the Annuitant |
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Annuity income is based on the following: |
-The amount of premium paid or cash value accumulated - The frequency of the payment - the interest rate -the annuitant age and gender |
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If an Annuitant dies during the accumulation period, the insurer is obligated to... |
Return the cash value or total premiums paid, whichever is greater |
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Two ways to fund annuities |
1.Single (lump sum) 2. Periodic-paid installments overtime |
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Two types of Periodic Payments |
1. Level Premium 2. Flexible Premium |
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Fixed Annuity provides |
1. Guaranteed minimum interest rate 2. Fixed premium payments 3. Fixed benefit distribution |
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A disadvantage of a fixed annuity is |
That the purchasing power that the Annuitant can afford may be reduced over time because of inflation. |
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Fixed Annuity premiums are deposited into the life insurance company's |
general account |
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Interest Rate Guarantees |
If the insurance company performs well the Annuitant gets a higher interest but has a minimum guaranteed interest rate. Usually 3% |
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Equity Indexed Annuity |
Are fixed annuities that invest on a relatively aggressive basis to aim for higher returns. |
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Market Value Adjusted Annuities (modified guaranteed) |
A single deferred annuity that allows the owner to lock in guaranteed interest rate over a specified maturity period. Usually 3-10 years. |
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Immediate Annuity |
One that is purchased with a single lump sum payment and provides income payments that starts within one year from the date of purchase. |
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Deferred Annuity |
An annuity in which the income payments begin sometime after one year from the date of purchase. |
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Surrender Value of annuity in accumulation phase is: |
100% of premium paid minus any prior withdrawals and related surrender charges. |
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Surrender charges |
The purpose is to help compensate the company for loss of the investment value due to early surrender of a deferred annuity. |
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Annuity Payment Option: Pure life (straight life/life only) |
Payment ceases at the Annuitant's death. Provides the highest monthly benefits. There is no guarantee that all the proceeds will be fully paid |
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Payment Option: Life with Guaranteed Minimum (refund life) |
If the Annuitant dies before the principal amount has been paid out, the remainder of the principal amount will be refunded to the beneficiary |
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Refund life pay out types |
1. Cash refund- lump sum-benefit payments already paid to annuitant 2. Installment refund- beneficiary will receive guaranteed installments until entire principal has been paid out |
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Annuity pay out option: Life with Period Certain |
The payout is guaranteed for the lifetime of the Annuitant and for a specified period of time for the beneficiary |
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Single Life Annuities |
Only covers one life |
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Multiple life |
Covers 2 or more lives |
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Who's life expectancy is taken into consideration in annuity contract |
Annuitant |
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Who bears the risk in a fixed annuity? |
The insurer |
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Licenses needed to sell variable annuities |
Life and securities license |
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Purpose of Annuity |
To provide lifetime income that the Annuitant cannot outlive |
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Two types of refund annuities |
Cash refund and installment refund |
