Glossary
A
Account Value
The value of a contract, which consists of the values of any fixed accounts or variable account options added together.
Adjusted Account Value
An account value increased or decreased by any Market Value Adjustment made to a Guaranteed Rate Option (GRO) account.
Annuitant
The person upon whose life an annuity benefit and death benefit are based. This individual has no rights to direct or alter the contract in any way.
Annuitant's Beneficiary
The person or persons named by the owner to receive the death benefit in an annuity when the annuitant dies.
Annuitization
The process of converting an annuity into a guaranteed income stream for an annuitant's life or a specific period of time.
Annuity
The systematic liquidation of principal and interest over time. Also, a contract issued by an insurance company that accomplishes this purpose.
Asset Allocation
A key concept in financial planning and money management, this investment strategy divides investments among different kinds of asset classes according to an individual's specific needs or goals, optimizing the risk/return balance of their portfolio.
Automatic Rebalancing Provision
An option that resets the investments within an annuity to maintain pre-defined allocation percentages, usually through an asset allocation program.
C
Contingent Annuitant
The individual who assumes the policy should the primary annuitant pass away. Required for annuitants over the age of 85.
Contingent Beneficiary
The person who replaces the listed beneficiary should that individual be deceased at the time of the owner's or annuitant's death and subsequent pay out or transfer of ownership.
D
Death Benefit
The benefit paid to the annuitant's beneficiary upon the annuitant's death.
Deferred Variable Annuity
A variable annuity in which there is an accumulation period before payout begins.
Diversification
A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, which are unlikely to all move in the same direction. Diversification reduces both the upside and downside potential and allows for more consistent performance under a wide range of economic conditions.
Dollar Cost Averaging
An investment strategy, in which units of a particular security are purchased at regular intervals with a fixed dollar amount of capital to help reduce volatility in the market price.
E
Exchange Traded Funds (EFT)
An index fund with similarities of both mutual funds and stocks that trades like stocks and are based on an index.
Exclusion Ratio
A tax term that means the investment in the contract is divided by the expected return. This portion of each annuity payment is excludable from gross income.
Expected Return
A tax term that indicates the expected amount to be received under an annuity contract, based on the periodic payment and the annuitant's life expectancy when benefits begin.
F
Fixed-Amount Payments
Periodic payments made in a specified amount that will completely exhaust a principal sum.
Fixed Annuity
An annuity that provides a payout expressed as a fixed dollar amount.
Fixed-Period Payments
Periodic payments made over a specified period that will completely exhaust a principal sum.
Flexible-Premium Deferred Annuity
An annuity purchased with periodic premiums, which may vary in future payout amounts.
Front-End Load
An expense charge made at the inception of an annuity contract.
G
Guarantee Period
The duration of a Guaranteed Rate Option account.
Guaranteed Interest Rate
A fixed annual effective interest rate that the insurance company declares for the duration of a Fixed Account option you select.
Guaranteed Rate Option
A duration of two, three, five, seven or ten years that locks in a fixed annual effective interest rate.
I
Immediate Annuity
An annuity purchased with a single premium with benefits to begin one payment interval (month, year) after this premium is paid.
Inflation
The rise in prices over time for products and services.
Installment Refund Annuity
An annuity in which the unrecovered purchase price is refunded at the annuitant's death by continuing the regular annuity payments to a beneficiary.
Interest-Out-First Rule
A federal tax rule that treats a premature withdrawal from an annuity contract as taxable interest rather than nontaxable principal.
Investment in the Contract
A tax term that means the net amount (cost) that the owner has invested in the annuity contract.
J
Joint Life Annuity
An annuity that terminates benefit payments at the first death of two or more annuitants.
Joint Owner
A joint owner allows for more freedom in the direction of the contract, but requires both owners to sign and approve all documents.
Joint-and-Survivor Annuity
An annuity that covers two or more annuitants and pays benefits until the last annuitant dies.
L
Large-Cap Stocks
Companies with a market capitalization between $10 billion and $200 billion.
Life Annuity
An annuity in which the payout is based on life contingencies.
Life Annuity with Period Certain
A life annuity with a guarantee that specifies a minimum number of payments will be made even if the annuitant dies prematurely.
M
Market Value Adjustment (MVA)
An upward or downward adjustment (never below the Minimum Value) made to the value of your GRO account for withdrawals, surrenders, transfers and certain other transactions made before the GRO account expires.
Minimum Interest Rate
The minimum interest rate, declared in the contract, which the company could ever credit to fixed accounts.
Minimum Required Distribution (MRD)
The minimum amount of money that must be withdrawn at age 70½ from a tax-deferred investment in order to avoid an IRS penalty.
P
Premature Withdrawal
A withdrawal that takes place before the end of a guaranteed period, within an annuity's withdrawal charge period or before the age of 59½ (with certain exceptions).
S
Separate Account
In a variable annuity, the account maintained separately from the insurer's general (investment) account, which allows investment results to be reflected directly in variable annuity contracts.
Single-Premium Deferred Annuity
An annuity purchased with a single, lump-sum premium payment that earns interest for a period of years before the payout period begins.
Single-Premium Immediate Annuity
An annuity purchased with a single, lump-sum premium payment that begins to pay out benefits one payment interval (i.e., month or year) after this premium is paid.
Spousal Continuation
A method by which the owner's spouse may choose to continue the contract rather than receive a death benefit. To accomplish spousal continuation, the annuity must be properly structured.
Straight Life Annuity
An annuity that terminates at the annuitant's death.
Surrender Charge
A charge made for a partial or full withdrawal from an annuity contract before the annuity starting date; often scales down over time.