Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Annuity concepts
| Question | Answer |
|---|---|
| accumulation phase | pay-in period when money is deposited and grows |
| Annuitization phase | pay-out period when accumulated value is turned into income payments |
| Who are the parties involved in annuity contract? | Contract owner Annuitant Beneficiary Insurers |
| Who is a contract owner | Contract owner is the person or the couple who buy the annuity and has certain rights. |
| What rights does the contract owner have? | Name or change the annuitant Name or change the beneficiary Choose payout option Add more money or take withdrawals Surrender or terminate agreement |
| Who is the annuitant? | The annuitant (insured) similar to insured in life insurance policy. Chosen by owner to receive payments during annuitization period. Annuitant must be an individual person not corporation or trust |
| Contract owner and annuitant | Frequently the same person |
| Beneficiary | Has no voice or control or management of the annuity and only benefits upon the death of a contract owner. Can be individual person entity like trust |
| Who is the insurer? | Party who issues the annuity contract |
| Who may represent the insurer? | Local bank financial planner brokerage firm agent/producer |
| Parties to annuity/contract owner | Names the annuitant Names the beneficiary Can withdraw money Can end contract |
| Annuitant (insured) | Receives the income Can breed more than one person |
| Beneficiary | Receives accumulation if owner dies May receive income payments if annuitant (insured ) dies sooner than expected |
| Life insurance | Can be used to create an estate Protects against dying too soon Uses a series of payments to guarantee a lump sum of money upon death |
| Annuities | Can be used to liquidate estate Protects against living too long Uses a lump sum of accumulated money to guarantee a series of income payments while alive |
| What is immediate annuity? Or single premium annuity SPIA | Provides an individual with an income that may begin as soon as a month after purchase or may be delayed up to a year. Funds accumulate in tax deferred basis |
| Single premium immediate annuity SPIA | Pays monthly income immediately. First payment after one month or interval period. Latest payments start after a year |
| Deferred annuities | No income stream immediately Annuity owner chooses premium amount and frequency of payments Payments can be monthly quarterly etc Has an accumulation period |
| What happens when you surrender or withdraw from annuity | 10% tax if withdrawn before 59 1/2 Surrender period-waiting period Surrender fee-penalty for early withdrawal |
| Death benefit (not life insurance) | Accumulated value paid if owner dies Total premiums paid minus any withdrawals |
| What is the life only option? | Sometimes called a pure life income, payments stop when the annuitant dies, regardless of when that occurs one month or twenty years |
| What is the advantage of the life only annuity option? | It pays the highest monthly income amount |
| The life only option is also referred to as | Straight life Pure life Life-no refund |
| Disadvantages of life only annuity | The annuitant may die before their life expectancy and the total payout they received was much less than the total amount paid into the contract |
| What is life with period certain | Pays an income for as long as the annuitant is alive Annuitant selects payment period 5,10,20 years If annuitant dies payments continue to the beneficiary for the rest of the period certain |
| Joint life and survivor | If one dies payments to survivor until their death Same or reduced |
| What is a joint life annuity option | Pays income until the death of the first two or more annuitants |
| What are the factors determining a life annuity payout amount | Annuitants age Annuitants gender Length of payment guarantee Assumed interest rate |
| What are fixed annuities? | Fixed annuity values are guaranteed against loss. Value of fixed annuity will never be less than the amount paid into the contract |
| What are general account assets? | Assets in the general account are conservatively invested typically in debt securities and other fixed rate investments that provide a steady return for many years |
| Interest rate guarantees | Taste generally declared at the beginning of the year and guaranteed for the year. Current rate may rise or fall from year to year but never be less than a guaranteed minimum rate that is stated in contract |
| What is a level benefit payment amount? | Annuitants can count on getting a specified dollar amount of income on a regular basis |
| What are variable annuities? | Variable annuities have the potential to keep pace with inflation because they’re supported by investments, stocks, and bonds |
| What are separate account assets? | The assets that support variable annuities are kept in a separate account where the investment risk is born by the annuity owner the owner makes the various investment choices called sub accounts which resemble mutual funds |
| What are annuity units? | The accumulation units are converted to annuity units from that point on the number of units stays the same throughout the annuity. |
| What is accumulation of units? | The accumulated values of variable annuities are expressed as accumulation units similar to shares purchased in a mutual fund. The value of an accumulation unit is found by dividing the total value of the separate account by the number of existing accumul |
| Regulations as securities | Variable annuities are regulated as insurance products and are also regulated as securities. This is called dual regulation. |
| Variable annuities | Separate account No guarantees by company owner assumes risk Premium buys accumulation units If annuitized accumulated money buys annuity units Value can go up or down Must be licensed by state and security regulators (SEC&FINRA) |
| Market value adjusted annuities | Single premium deferred annuities Interest rate for a fixed number of years Early surrender Withdrawal penalty Interest penalty May be higher or lower Not a variable product No securities license required |
| Uses of annuities | Life income Tax favored savings Funding individual retirement accounts (IRA) Education funds |
| Group annuities | |
| Tax deferred (as long as it remains policy) | Not taxed while in the policy Policy owner is taxed if gain is withdrawn |
| Full surrender | Any gain is taxable |
| Withdrawals (partial surrenders) | Taxed only if withdrawals exceed premiums paid Only the gain (if any) is taxed |
| Dividends | Considered to be a return of premium Not taxed but interest earned is |
| Death benefit lump sum | Not taxable if paid to beneficiary in lump sum Interest is taxable If paid over time Pay off payment taxed part not taxed |
| Accelerated death benefits | Critically ill Not taxed Death Not taxed |
| Taxation of group life insurance | Premiums paid by employer are tax deductible Premiums paid by employee are NOT tax deductible Premiums paid by employer for insurance above $50000 is taxable income to the employee |
| Modified endowment contracts (MEC’s) | Life insurance under federal income tax law Offer tax free death benefits and tax deferred cash value accumulation |
| Annuities premiums (regarding taxes) | Premiums not tax deductible |
| Annuity payments after annuitization |
Created by:
Jsmooey