Annuity

Question 1

Bonus Credits

Answer 1

Some annuities promise a bonus on your contract value, typically 1% to 5% of your purchase price. Always check the fees and expenses associated with this feature, as they can outweigh the benefit of the bonus.

Question 2

Deferred Annuity

Answer 2

With a deferred annuity, you make payments to an insurance company, which will be free from taxes until you reach a particular age or a date specified in your contact.

Question 3

Free look Period

Answer 3

Variable annuity contracts typically have a “free look” period of ten or more days. During this period, you are free to terminate your contract without paying any surrender charges and you will receive a refund for the amount you paid. The “free look” period is a time for you to continue to ask questions so that you understand the variable annuity and are sure that it is right for you.

Question 4

Immediate Annuity

Answer 4

This annuity has no accumulation phase. Instead, you start receiving annuity payments right after you purchase the annuity.

Question 5

Interest

Answer 5

The price paid for borrowing money. It is expressed as a percentage rate over a period of time.
Interest rates may be fixed, meaning the rate is set and will not change, or may be variable or “floating,” meaning the rate may move higher or lower over time.

Question 6

Surrender Charge

Answer 6

A type of sales charge that applies if you withdraw money from a variable annuity within a certain period of time, usually six to ten years. This is known as the surrender period. The charge declines over time until it no longer applies. For example, a 7% surrender charge might apply in the first year after purchase. The charge may fall to 6% in the second year, 5% in the third year and so on, until the eighth year, when it no longer applies.