Annuities Flashcards
What is an annuity?
contract that provides income for a specified number of years or for life.
Who has the rights of an annuity?
the owner
what is the annuitant?
person who recieved benefits or payments from the annuity.
what is the accumulation period?
aka pay in period. is the priod of time which the owner makes payment.
what is the annuity period?
aka annutization period liquidation period or the payout period. when the annuity starts paying the annuitant.
what is single premium immediate annuity?
purchased in one big lump payment. Starts paying out within one year.
what is a deffered annutity?
starting paying out in over a year. Used a lot for retirement. Person will receive current interest rate or guaranteed interest rate whichever is higher.
what is a single premium deffered annuity?
one lump sum payment. Starts paying in over one year.
What is the penalty for early withdrawls?
10% penalty for early withdrawls prior to age 59 and a half.
what are surrender charges?
helps company compensate for loss of investment due to early surrender of a deferred annuity.
what is a the formula for money at surrender?
at surrender owner gets= premium +interest- surrender charges
what is a waiver?
annuity contracts provide a waiver if the annuitant is in long term care for more than 30 days.
what is a bail out provision?
contraact holder can foregiht annuity if interst rates drop below a certain level without paying surrender charge.
what is death benefits?
if annuitant dies during accumulation period the insurer has to return cash values or total premiums which ever is greater.
what is pure life?
aka life only or straight life. The payment ceases at death and provides the highest monthly benefits.
what is life with guaranteed minimum?
if annuitant dies it goes beneficary entire principal is paid.
what is life with period certain.
provides income for life and a for a certain period.
what is installment refund?
when annuitant dies. annuitants beneficary will continue to receive guaranteed installments until the entire principal has been paid.
what is cash refund?
when annuitant dies beneficary recieves a refund of principal amount or the original amount paid into annuity. Whatever payments were already made.
what is fixed period installments?
insured selects time frame insurer selects how much payment
what is fixed amount installments?
insured selects how much payment insurer selects how long.
what are the features of fixed annuities?
- guranteed minimum interest rate
- income payments that do not vary
- company guarantees payment and duration
where are fixed annuties deposited?
insurance companies general account
what are indexed annuities?
are fixed annuties that invest on a relatively aggressive basis and aim for high returns.
what is a variable annuity?
is a hedge against inlfation and is variable from the standpoint that the annuitant may receive different rates of return.
what are the 3 main characteristics of variable annuities?
- underying investment
- interest rate
- license requirements
are quailfied and non qualified annuities tax deferred?
yes.
