The definitions in this glossary apply to fixed and fixed-indexed annuities. Definitions are general in nature and may not reflect the definitions, terms and conditions that apply to your annuity contract.
- Accumulation Period
- The period between the time you make your purchase payment and the time you make withdrawals, when your annuity is accumulating interest and value.
- Administrative fees
- Fees that cover the cost of administering and maintaining an annuity contract or life insurance policy.
- The person upon whose life expectancy the annuity payments are based.
- Converting the value of the annuity contract into a stream of income, either for a lifetime or a specified period of time.
- A contract that can make payments to you at regular intervals based on purchase payments that you put into the contract.
- Property owned that has value, such as a home, car, stocks or bonds.
- The person, institution, trustee or estate that you designate to receive benefits from your annuity or life policy if you die.
- The maximum indexed interest rate that can be credited for a term of a fixed-indexed annuity.
- Contract Anniversary
- The anniversary of the day the contract was issued.
- Contract Owner
- The person who purchases the annuity and has all rights to the contract.
- Death Benefit
- With respect to annuities, this provision typically states that if you die before the annuity payments start, the contract value will be paid to your beneficiary. With respect to life insurance, it is the amount payable to the beneficiary under the policy upon the death of the insured.
- Declared Interest Rate
- A rate set by the company at the start of a term of a fixed-indexed annuity contract.
- Declared Rate Strategy
- Credits interest daily at a rate declared in advance of a term for a fixed-indexed annuity contract.
- Early Withdrawal Charge
- Often referred to as a surrender charge, this charge applies if you surrender your contract or withdraw an amount in excess of the free withdrawal allowance. The charge is equal to the amount subject to the charge multiplied by the applicable rate. The percentage rate may be reduced or eliminated after the contract has been in force for a certain number of years.
- Easy Systematic Payment Program
- A non-contractual program in which you have the option to request regular income payments from your annuity before the early withdrawal charge period ends without incurring an early withdrawal charge.
- Fixed Annuity
- This type of annuity offers the stability of a fixed interest rate that is determined by the company and is guaranteed never to be below a minimum interest rate.
- Fixed-Indexed Annuity
- A variation of a traditional fixed annuity that gives you the opportunity to earn interest at an interest rate that is determined according to a formula based, in part, on the change of a referenced index.
- Flexible Premium Annuity
- An annuity that accepts periodic contributions, which can usually be made at any time.
- Free Look Period
- Period of time after an annuity contract is issued and delivered when the owner may cancel the policy or contract without penalty and receive either the initial payment or the current value of the annuity.
- Guaranteed Death Benefit Rider
- Death benefits that are typically enhanced by the rider provisions and guaranteed to be paid to the beneficiary(ies) under certain annuity contracts, provided the contract owner satisfies all purchase payment and contract requirements. There is an annual charge for this rider.
- Guaranteed Withdrawal Benefit Rider
- Based on your selection at contract issue, the guaranteed withdrawal benefit rider provides guaranteed income for either a lifetime or a period of time, regardless of market performance. Before you take income, the benefit base amount, on which payments are based, increases annually at a percentage outlined on your rider's specifications page. When you start income withdrawals, you receive a percentage of the rider's benefit base amount each year. There is an annual charge for this rider.
- Immediate Annuity
- An annuity that can give you access to a stream of income immediately after you purchase it.
- Indexed Interest Rate
- For a fixed-indexed annuity contract, the rate of interest is determined and credited to the amount remaining in an interest strategy on the last day of the term using a formula that is based on the index method and rules that apply to that strategy.
- Issue Age
- The age of the contract owner at the time the policy is issued on the contract effective date.
- Joint and one-half survivor annuity
- This annuity option offers payments of a fixed amount over the lifetimes of two payees. After the death of the primary payee, the secondary payee receives 50 percent of the original payment amount for the remainder of his or her lifetime. If the secondary payee is the first to die, there is no reduction in the payment.
- Monthly Averaging Strategy
- A monthly averaging strategy compares the average of the closing index values at the end of each month-long period during the term to the closing index value on the first day of the term. If the result is positive, interest is credited, subject to the cap. If the result is negative, the credited interest rate is 0%.
- Monthly Sum Strategy
- A monthly sum strategy compares the closing value of the index at the end of a month-long period to the closing value at the beginning of that month-long period. Positive monthly changes are subject to a cap, but negative monthly changes are not limited. The credited interest rate is the sum of the 12 monthly index changes for that term, but not less than 0%.
- Non-Qualified Annuity
- An annuity purchased with after-tax dollars.
- Participation Rate
- The percentage of net index growth that is used to calculate the indexed interest rate for a fixed-indexed annuity contract for certain indexed strategies.
- Payout Options
- Payment options you can choose when annuitizing your contract or your beneficiary can choose at the time of a claim under a contract or a life policy. Payout options are referred to as settlement options in some annuity contracts.
- Point-to-Point Strategy
- A point-to-point strategy compares the closing value of the index at the end of the term to the closing value on the first day of the term. If the result is positive, interest is credited, subject to the cap or participation rate. If the result is negative, the credited interest rate is 0%.
- Purchase Payment
- The amount you pay in exchange for an annuity contract.
- Qualified Annuity
- An annuity contract bought with pre-tax dollars as part of a tax-qualified retirement plan.
- Required Minimum Distribution (RMD)
- The minimum annual required distribution amount for an IRA holder who reaches 70 1/2. All annuity contracts are subject to the required distribution rules of federal tax law. These rules vary based on the tax qualification of the annuity contract or the plan under which it is issued.
- Settlement Options
- Payment options you can choose when annuitizing your contract or your beneficiary can choose at the time of a claim under a contract or a life policy. Settlement options are referred to as payout options in some annuity contracts.
- Single Premium Annuity
- An annuity contract that accepts a single purchase payment.
- Surrender Value
- The amount payable upon cancellation or surrender of a policy or contract. You may also be able to borrow against this amount. Sometimes referred to as the cash value.
- The annuity contract is generally tax deferred, which means that you are not taxed on the earnings in your contract until the money is paid to you. Contracts owned by non-human owners, such as trusts or corporations are subject to special rules.
- Tax Qualification
- Annuities may also qualify for tax-deferral treatment or serve as a funding vehicle under tax-qualified retirement plans that are governed by the Internal Revenue Code. Contributions to a tax-qualified annuity are typically made with pre-tax dollars while contributions to other annuities are typically made from after tax dollars. Tax-qualified annuities may also be subject to restrictions on withdrawals that do not apply to other annuities. Examples of tax qualifications include traditional IRA, TSA, SEP IRA and SIMPLE IRA.
- For a fixed-indexed annuity, the period of time over which an interest rate is calculated for an indexed strategy and fixed for a declared rate strategy.