Life: Annuities Flashcards
Life comtingency
Dependent on whether or not the insured is alive
Qualified plan
A retirememt plan that meets the IRS guidelines for receiving favorable tax treatment
Annuity
A contract that provides income for a specific period of years
Motality tables
Indicate the number of individuals within a specific group, starting at a certain age, who are expected to be alive at a certain age
Accumulation period
The period of time over which the owner makes paymentd (premiums) into an annuity
Annuity period
Time during which the sum that has been accummulated during the accumulation period is converted into a stream of incoming payments to the annuitant
Also called annuitization period, liquidation period, or pay-out period
Single premium
One-time lump-sum paymemt
Period payments
Premiums are paid in installments over a period of time
Level premium
The owner/annuitant pays a fixed installment
Flexible premium
The amount and frequency of each installment varies
Immediate annuity
Purchased with a single, lump-sum payment and provides income payments that start within one year from the date of purchase, typically within one month.
Deferred annuity
An annuity in which the income payments begin sometime sfter one year from the date or purchase can be purchased with single or periodic premium
Nonforfeiture law
Stipulates that a deferrered annuity must have a guaranteed surrender value that is available if the owner decides to surrender the annuity prior to annuitization. However, a 10% charge will be applied to all early withdrawals under 59 1/2
Bail-out provison
Allows the contract holder to surrender the contract without charge, in the event that interest rates drop a specified amount within a specified time frame
Fixed annuity
- Guaranteed minimum rate
- Income payments that do not vary from one payment to the next (level benefit payment amount)
- Guarantees specified dollar amount for each payment and the length of the period of payments as determined by the settlement option chosen by the annuitant
General account
Comprise of mostly conservative investments like bonds. These investments are secure enough to allow the insurance company to guarantee a specify rate of interest, as well as assure the future income payments that the annuity will provide
Pure life annuity payment
Payment until death. Provides the highest monthly benefits
Also known as straight life or life-only
Life with guaranteed minimum
If annuitant dies, remainder will be refunded to beneficiary
Also called refund life
Life with period (term) certain
Payouts are guaranteed for the lifetime of the annuitant and for a specified period of time for the beneficiary
joint life annuity payment
A payout arrangement where two or more annuitants receive payment until the first death among the annuitants, and then payment stop
Joint and survivor
Gurantees an income for two recipients neither can outlive. Commone for the survivor to receive a fraction of the payment after the death of the first
Annuities certain
Short-term annuities that limit the amounts paid to a certain fixed perod or until a certain fixed amount is liquidated
Fixed-period installments
The annuitant selects the time period for the benefits, and the imsurer determines how much each payment will be
Fixed-amount installments
The annuitant selects how much each payment will be, and the insurer determines how long the benefits will be paid
Indexed (or equity indexed) annuities
Fixed annuities that Invest on a relatively aggressive basis
Market value, or market value adjusted annuity (MVA)
Single premium deferred annuity that allows the owner to lock in a guaranteed interested rate over a specified maturity period
Also know as modified guaranteed annuitiy
