Annuities Flashcards
403(b) plan
retirement plan for certain employees of public schools employees of specific tax exempt organizations, and ministers
1035 contract exchange
if annuity is exchanged for another annuity, a gain is not realized. annuity cannot be exchanged for a tax-free life insurance policy. This particular provision allows policyholder to transfer funds from a life insurance/endowment/annuity to a new policy without having to pay taxes
accumulation period
when premiums an annuitant pays in to annuities are credited as accumulation units; may continue between time after premiums average ceased but payout has not begun. at end of accumulation period, accumulation units are converted to annuity units
annuity units
value of contributions made by annuitant.
value=credit to the account and varies depending on the value of the stock investment
cash refund option
upon death and before all payments have been made, the excess amount paid by purchaser over the total payments received will be paid in one sum to beneficiaries
deferred annuity
postponement of payments until a specified period of time or until annuitant reaches a certain age
-purchase this with single or flexible premiums
equity index annuity
fixed deferred annuity, offers guarantee minimum interest rate and excess interest feature based on the current market index
exclusion ratio
faction used to determine amount of annual annuity income exempt for federal income tax; total contributions in annuity/expected ratio
fixed annuity
guaranteed rate of return; interest payable in any year is given in advance by insurer and is no less than minimum specified in the contract; this is risky for insureres
immediate annuity
provide payment of annuity benefit at one payment interval from date of purchase; purchase only with single payment; typically begin paying income within 1 month of purchase
joint life and survivor option
if either person dies, the income payments go to the survivor for life; when survivor dies, no payments are made to anyone
- full: pays same benefit amount to survivor
- 2/3: pays 2/3 of original joint benefit
- 1/2: pays 1/2 of original joint benefit
life with period certain annuity (life income with term optoin)
provides income to annuitant for life but guarantees a min period of payments; if death during this period, beneficiary get the payments for remainder of period
market value adjustment
attached to a deferred annuity, featuring guarantee fixed interest rates combined with interest rate adjustment factor (rates that increase or decrease in response to the market)
period certain annuity
annuity income option that guarantees definite minimum period of payments, as opposed to annuity which gives out when annuity dies
periodic payment annuity (flexible premium)
annuity owner making mulitple premium payments to accumulate principal. typically flexible with frequency and amount
principal
original sum of money paid into annuity through premiums
single premium annuity
entire premium is paid in one sum at the beginning of the contract period. can be deferred or immediate single premium
straight life annuity
guaranteed income of annuitant’s lifetime, and the stops after death
variable annuity
payments will be made periodically and the amount fluctuates with common stock; given in separate accounts instead of general accounts; to sell this, agent must have Financial Industry Regulatory Authority (another license)
annuitant
one who annuity is payable