Glossary
The period when the owner of a deferred annuity makes payments into the contract and accumulates assets.
The period when the owner of a deferred annuity makes payments into the contract and accumulates assets.
The shares of ownership you have in a variable annuity contract during the period you are saving for retirement. As you pay additional premiums, you buy additional units.
The sum of premiums and earnings, minus contract charges and any withdrawals.
An annual fee, typically $30 or $40, paid to the insurance company for administering the contract. The fee often is waived for contracts with higher account values.
The person(s) upon whose life annuity payments are based and who often receives the annuity payments.
The election to start receiving regular payments from an annuity. The annuity is said to be annuitized.
To convert the accumulated value of an annuity into a stream of income by electing to start receiving regular payments, either for one or more lifetimes or a specific period of time.
A series of periodic payments.
The date income payments start. Also known as the annuity starting date or the maturity date.
A legal agreement between you and an insurance company, sometimes called an annuity company.
Annuity Income Payments (or Annuity Payments):
The regular payments received as a result of the election to annuitize an annuity contract.
The number of units you own in a variable annuity contract during the period you are taking income. The number of your annuity units is fixed, and does not change.
(AIR) The rate of interest an annuity provider uses in calculating the amount of each variable annuity income payment. Also known as the benchmark rate or the hurdle rate.
The cost of an annuity based on insurance company tables, which take into account various factors such as your age and gender.
Variable annuity asset allocation programs make recommendations as to which investment portfolios to allocate money to, given a contract owner's financial goals and prevailing market conditions. Purchase payments are then allocated to the investment portfolios in selected percentages. Portfolio rebalancing programs "rebalance" the amount of money allocated to each investment portfolio as the target percentages move out of alignment over time because some portfolio share values grow faster than others. Some asset allocation programs regularly review an investor's financial goals and market conditions and make corresponding changes in the investment portfolios the owner invests in. Other programs may do so only when the owner experiences a major change in his or her financial situation.
The person typically designated under the contract to receive any payments that may be due upon the death of the owner or the annuitant.
If the annuitant dies before the total of annuity payments received equals the premiums paid for the annuity, a lump sum equal to the difference between the premiums and the sum of the annuity payments already made is paid to the beneficiary.
The amount that can be withdrawn from the contract after deduction of any surrender charge. It is equal to the contract value minus any surrender charge. Also known as cash value.
An annuity contract that allows you to take some or all of the value of undistributed annuity payments.
A process provided under some annuities that allows the annuitant to take some or all of the value of undistributed annuity payments.
The date an annuity contract becomes effective.
The person(s) who pays premiums under the contract and has the rights under the contract, such as making withdrawals, surrendering the contract, and changing the beneficiary or other terms of the contract.
The sum of premiums and earnings, minus contract charges and any withdrawals.
A payment made to the beneficiary upon death of contract owner and/or annuitant.
An annuity contract that you purchase either with a single premium or with periodic payments to help save for retirement. With a deferred annuity, you can choose the point at which you convert the accumulated principal and earnings (or losses) in your contract to a stream of income.
A program for investing a fixed amount of money at set intervals with the goal of purchasing more accumulation units in a contract at low values and fewer units at high values. Variable annuity dollar-cost averaging programs involve allocating a purchase payment to one investment option, such as the money market fund or fixed option, and then having that payment periodically transferred out of that account to other subaccounts. Dollar-cost averaging does not assure a profit or protect against a loss.
A death benefit that goes beyond the guaranteed minimum death benefit by locking in investment gains every few years or every year, or paying a minimum stated interest rate on purchase payments.
An annuity with payout based on a market index, also known as an indexed annuity.
The amount, as a percentage of your total variable annuity account value, that you pay annually for operating, management, and insurance expenses.
Part of the company's general account to which a variable annuity contract owner may allocate all or part of premium payments. Also known as fixed investment option.
An annuity contract that guarantees you will earn a stated rate of interest during the accumulation phase of a deferred annuity, and that when you annuitize, you will receive a fixed amount of income on a regular schedule.
A contract that allows payments to be made at any time after the initial purchase payment.
A certain number of days after receipt of the contract during which an annuity contract purchaser may revoke the purchase of the contract.
All assets of the insurance company not allocated to separate accounts.
The basic death benefit offered under virtually all variable annuity contracts. Payment is equal to the greater of (1) the contract value, and (2) purchase payments less withdrawals, and is made to the beneficiary upon the death of the owner and/or annuitant. Many variable annuity contracts now offer "enhanced" death benefits.
Protection during the life of the owner or annuitant against investment risks under variable annuity contracts that guarantee the level of account values or annuity payments. There are two types-guaranteed minimum income benefits and guaranteed minimum account value benefits.
The period during which the level of interest credited under a fixed annuity is guaranteed.
Guaranteed Minimum Account Value Benefit:
A guarantee that promises that, at specified periods, the account value will not be less than purchase payments, sometimes with a minimum rate of interest.
Guaranteed Minimum Death Benefit:
A basic death benefit offered under virtually all variable annuity contracts. Payment is equal to the greater of (1) the contract value or (2) premium payments less prior withdrawals, and is made to the beneficiary upon the death of the owner and/or annuitant. Many variable annuity contracts now offer enhanced death benefits.
Guaranteed Minimum Income Benefit:
A guarantee that ensures under certain conditions the owner may annuitize the contract based on the greater of (1) actual account value or (2) a 'payout base' equal to premiums credited with some interest rate or the maximum anniversary value of the account value prior to annuitization.
An annuity contract that you buy with a lump sum and begin to receive income from within a short period, always less than 13 months. An immediate annuity can be either fixed or variable.
The various methods of receiving annuity income that an annuity contract offers. You may choose from among them the one that suits your situation best. Typically, there are six or more choices, many guaranteeing income for life.
An annuity that provides that if the annuitant dies before the total of the annuity payents received at least equals the premiums paid for the annuity, the annuity payments will continue to the beneficiary until the total of the annuity payments equals the premiums.
Charges that cover administrative costs and the cost of the insurance guarantees, including the mortality and expense (M&E) risk.
The fee paid in connection with the professional management of the assets of the investment portfolios underlying variable annuities.
The insurance company that issues the annuity contract.
A collection of individual investments chosen by a professional manager to produce a clearly defined investment objective. Portfolios, which are structured the same way as open-end mutual funds, are offered in a variable annuity contract and are available to people who purchase the contract.
A life annuity in which there are two annuitants, known as joint annuitants. Annuity payments continue as long as either annuitant is alive.
Annuity payments distributed by the insurance company for the life of the annuitant.
Life Annuity With Installments Certain:
If the annuitant dies before a certain number of payments have been made, the remaining number of payments is made to the beneficiary.
Life Annuity With Period Certain:
A type of refund annuity in which if the annuitant dies before payments have been made for some minimum number of years, payments to the beneficiary will continue until the end of the guarantee period.
Guarantees that provide principal protection by guaranteeing the level of account values or annuity payments.
This feature, which is included in some annuity contracts, imposes a positive or negative adjustment if you prematurely surrender your fixed annuity or the fixed account of your variable annuity. The adjustment offsets any losses the insurance company might incur in liquidating assets to pay the amount due to you.
Mortality And Expense (M&E) Risk Charge:
A fee that pays for the insurance guarantees, including the guaranteed minimum death benefit; the guaranteed ability to choose a payout option at rates set in the contract at the time of purchase that can provide an income that cannot be outlived; and the guarantee that the insurance charges will not increase.
An annuity contract you buy individually rather than as part of an employer-sponsored qualified retirement plan. You pay the premium with post-tax dollars. With a deferred nonqualified annuity, your principal grows tax-deferred.
An annuity contract that does not have a surrender charge.
A withdrawal of an amount less than the entire cash surrender value of the contract.
The period between annuity payments, whether a month, a calendar quarter, or a year.
Payout Phase or Payout Period:
The period during which the money accumulated in a deferred annuity contract, or the purchase payment for an immediate annuity, is paid out as income payments.
A type of asset allocation program that periodically reallocates contract assets among fixed and variable investment options under a variable annuity contract in specified proportion.
Premiums or Purchase Payments:
The amount you pay to buy an annuity or any other insurance product. With a single premium annuity you pay just once, but with other types such as "flexible premium" contracts you pay an initial premium and then make additional premium payments.
The amount of money used to purchase an annuity, bond, mutual fund, stock or other investment. The principal is the base on which your earnings accumulate.
The investment portfolios offered within a variable annuity that are run by the investment managers of the insurance company or its affiliates. The annuity may also offer portfolios run by managers working for another financial institution, such as a mutual fund.
The rate for converting contract value to annuity income payments; rates are set in the contract.
An annuity contract under which annuity payments stop when the annuitant dies. Also known as a straight life annuity.
An annuity contract you buy with pre-tax dollars as part of an employer-sponsored qualified retirement plan.
An annuity used in connection with a tax-deferred retirement plan such as a 401(k) plan.
Ratchet Guaranteed Minimum Death Benefit:
A type of death benefit that is equal to the greater of (a) the contract value, (b) premium payments less prior withdrawals, or (c) the contract value on a specified prior date.
Rising Floor Guaranteed Minimum Death Benefit:
A type of death benefit that is equal to the greater of (a) contract value or (b) premium payments less prior withdrawals increased annually at a specified rate of interest.
An IRA or qualified retirement plan that you move from one trustee to another. You can roll over any qualified plan, including a qualified annuity, into an IRA, preserving its tax-deferred status.
The account established by the insurance company to hold the assets under your variable annuity. It is separate from the company’s general account, where fixed annuity premiums are deposited. Money in the separate account is generally not available to the company’s creditors.
This type of annuity contract is purchased with a one-time payment. All immediate annuities and some deferred nonqualified annuities are in this category.
A death benefit that guarantees payments with interest or that is increased regularly to protect investment gains.
This term refers to divisions within a separate account of the insurance company offering the variable annuity. Each subaccount is invested in shares of a specific underlying investment portfolio.
A charge imposed on the contract owner for withdrawals from the contract before the end of the surrender charge period. The surrender charge period typically is five to seven years.
A program that allows a variable annuity contract owner to have a check for a specified amount sent monthly or quarterly as a partial withdrawal from the annuity contract value to the owner or another designated person prior to the annuity starting date. Many annuity contracts permit 10% or 15% of contract value to be withdrawn annually without a surrender charge. Unlike life-time annuity payments, systematic withdrawals can continue only as long as the contract cash value is not exhausted. But these programs can offer more flexibility than life annuity payments, since systematic withdrawal payments can be reduced, increased, or stopped. The tax treatment of systematic withdrawals differs from that of annuity payments.
Annuity with income payments over a fixed number of years.
The movement of assets from one subaccount to another.
The stocks, bonds, cash equivalents or other investments purchased by a variable annuity investment portfolio or mutual fund with the money you and other people allocate to that portfolio or fund.
The dollar value of a single accumulation or annuity unit, which changes constantly to reflect the current combined total value of the underlying investments in your investment portfolios, minus expenses.
An annuity contract that allows you to allocate your premium among a number of investment portfolios. Your contract value, which can fluctuate in the short term, reflects the performance of the underlying investments held in those portfolios, minus the contract expenses.
A distribution from an annuity other than scheduled annuity payments.
An administrative fee charged on withdrawals.
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