| A | B |
|---|
| Annuities protect against the risk of | living too long |
| Annuities are ways of providing | a stream of income for a guaranteed period of time |
| Monthly amt. an annuitant receives is based on | principal amt., rate of interest, length of payout period |
| Contract owner of an annuity | individual who pays premiums and has rights of ownership |
| The income, benefits distributed at regular intervals during teh liquidation phase of an annuity contract is normally paid to | The annuitant |
| The person who receives survivor benefits upon annuitants death | Beneficiary |
| Pay-in period where the contract owner makes the purchase payments | Accumulation period |
| alos called the liquidation period, annuitization period or payout period | Annuity period |
| With annuities you cannot make installment payments and | get paid immediately |
| purchased with a single lump sum, and starts to make payments in the first year, BUT usually 30 days from teh purchase date | Immediate annuities |
| will start to provide payments after the first year | Deferred annuity |
| paid with a lump sum | Single Premium Deferred Annuity (SPDA) |
| paid with monthly payments | Flexible Premium Deferred Annuity (FPDA) |
| Interest accrued in annuities are deferred until | distribution |
| If deferred annuity canceled during early years, insurer will assess a back-end load called a | surrender charge |
| waives the surrender charge when the interest drops below a certain number | Bailout feature |
| before a deferred annuity can be terminated with its surrender value, the insurer must obtain authorization from the | owner |
| Accumulation value of a deferred annuity = | sum of premiums pd. & interest minus expenses and withdrawals |
| Annuity payout options are | Straight life, cash refund, installment refund, life with period certain payout |
| Pays annuitant a guaranteed income for the annuitor's lifetime | Straight life income payout for annuity |
| Guaranteed income to the annuitant for life; if he/she dies lump sump pd. to beneficiaries | Cash refund payout for annuity |
| Pays a guaranteed payout to the annuitant for life; if he/she dies the beneficiary receives same monthly installment | Installment refund payout for annuity |
| Provides that benefit payments continue for a minimum number of years regardless of when the annuitant dies | Life with period certain payout for annity |
| Annuities can also be defined by their | investment configuration |
| Two types of annuity classification based on investment configuration | Fixed annuities and Variable annuities |
| provide a guaranteed rate of return, fixed annuities credit interest at a rate no lower than the contract guaranteed rate | Fixed annuity |
| does not provide a guaranteed rate of return because of the investment risk, although cash value is based on results of investments | Variable annuity |
| type of fixed annuity that offers potential for higher rate of return than a fixed annuity | Equity index annuity |
| Equity index annuity is sometimes tied to | S & P 500 |
| Income interest is | federally taxable; must be reported for federal tax purposes |
