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26 Cards in this Set
- Front
- Back
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Immediate Annuities |
Are annuity payments that begin immediately after the annuity is purchased, do not have an accumulation period, and have payout periods which must begin within one year of the first payment. |
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Deferred Annuities |
have annuity periods beginning sometime in the future, after one year from purchase, or later. It can be purchased with one or multiple premium payments. |
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Single |
A single premium can be used to purchase an annuity. This type of annuity is called a single premium deferred annuity (SPDA) or a single premium immediate annuity (SPIA). |
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Period Payment |
Multiple premiums are paid into the annuity. There are two types: level and flexible (FPDAs) |
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Level |
Multiple premiums are paid periodically into the annuity prior to the onset of payout. The premium is level (same amount) throughout the entire accumulation phase. |
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Flexible (FPDAs) |
Multiple premiums are paid into the annuity. Both the premium amount and frequency of payments are flexible. This type of annuity is called a flexible premium deferred annuity (FPDA). |
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Life Annuities Payout Option |
Guarantees income for life that the annuitant cannot outlive. There are several types of life annuities based on the amount of guarantee, or assurance that the full value of the annuity will be paid out. Three types: straight life, life annuity with period certain and refund life annuity |
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Straight Life (Life only or Pure Life) |
The annuitant receives annuity payments for his entire life. Upon the annuitant's death, the annuity payments stop. The insurer retains any balance on the annuity. |
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Life Annuity with Period Certain |
Provides the annuitant with guaranteed income for life and further guarantees annuity payments for a minimum number of years, such as 10 or 20. If the annuitant dies within the period certain, the beneficiary will receive annuity payments for the remainder of the period. |
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Refund Life Annuity |
The refund life annuity provides a greater degree of guarantee. The annuitant will receive income for life, and the beneficiary will receive the balance of premiums plus interest minus benefits already paid when the annuitant dies. |
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Cash (Lump-sum) |
the annuitant receives the cash value of the annuity in one lump-sum. The interest earned on the principal is taxable upon receipt. |
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Cash Refund |
The beneficiary receives the balance of premiums plus interest rate. |
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Tax-Sheltered Annuities |
Are available to employees of tax-exempt nonprofit organizations and public schools in order to provide retirement income for employees. |
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Retirement Income Annuities |
A deferred annuity with a decreasing term life insurance rider, which provides a beneficiary with a death benefit and the annuity's surrender value if the annuitant dies prior to retirement. |
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Annuities |
At its most basic, an annuity provides guaranteed income for life by systematically liquidating an estate. Two of the most common uses of annuities are providing lifetime income and accumulating money for a retirement fund. |
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Insurance Aspects of Annuities |
Life insurers sell annuities because they have access to mortality data, but keep in mind that annuities are not life insurance. Annuities are the opposite of life insurance. When the annuitant dies, a death benefit is not paid. Typically, annuities pay benefits until the annuitant's death. Insurers use the law of large numbers to determine when annuitants will die. The proportion of annuitants living beyond and dying before their expected life spans tends to average out. |
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Accumulation Phase |
The accumulation phase is the pay-in period, when the contract owner makes premium payments into the annuity. During the accumulation phase, the principal (premium) earns compound interest. |
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Annuity Phase |
Upon annuitization, the annuity's total cash value is converted into income payments. The annuity phase is the income or payout period when payments from the annuity are being made to the annuitant. Annuity payments are made monthly, quarterly, semiannually or annually. Each annuity payment is comprised of principal and interest. The interest portion of the payment is taxable income, but the principal portion is not taxable since it was funded with after-tax dollars.
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Contract Owners |
The individual who purchases the annuity, pays the premium, and has rights of ownership. |
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Annuitant |
The individual covered by the annuity; whose life the annuity has been issued. |
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Beneficiary |
The beneficiary is the person who receives survivor benefits upon the annuitant's death. |
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Surrender and Withdrawal Charges |
If a contract owner partially or entirely surrenders a deferred annuity before annuitization, the insurer will impose a surrender charge. |
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Guaranteed Minimum Withdrawal Benefit |
It is an option that may be purchased for retirement annuities. It provides a way for annuitants to protect their retirement investments from market downturns by giving annuitants the right to withdraw a maximum percentage of their investment each year until the amount of the initial investment has been recovered. |
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Death Benefits |
Are paid to the beneficiary in the event that the annuitant dies during the accumulation phase. The death benefit is equal to the total premiums paid or the cash value, whichever is greater. |
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Fixed Annuities |
Have a guaranteed minimum interest rate at which the premium payments accrue interest during the accumulation phase and a fixed interest rate at which level annuity payments are paid during the annuity phase. Premiums for a fixed annuity are invested in the insurer's general account. Fixed annuities pay a level annuity payment throughout the annuity phase. |
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Variable Annuities |
Have variable interest rates and benefits, and the insurer cannot guarantee a certain dollar amount periodic annuity benefit. Policy owners choose where their premium are to be invested. Premiums can be invested in the insurer's general account and/or separate account. |
