- Annuitant: the person upon whose life the annuity contract is payable. The annuitant may or may not be the owner of the annuity.
Accumulation Period: the period between the time a premium or premium payments are made, and income payments start.
Accumulation Units: pertains to variable annuity contracts. Premiums paid to the company, less a deduction for any expenses, are converted to accumulation units and credited to the individual’s account. The value of each unit purchased will go up or down with the market.
Annuity Units: before a variable annuity can be paid out the accumulation units are converted to annuity units. Annuity units are the basic measure and method by which a purchaser’s annuity income is determined. Once the annuitization or payout period begins, the number of annuity units does not change. However, the value of the annuity units will go up or down with the market.
Annuitization or Income Date: a date or age named in the annuity at which time the company begins making annuity payments.
Annuitization Period: the period of time periodic income payments are made.
Beneficiary: the person (named by the policy owner) entitled to receive benefits, if any, upon the death of the annuitant.
Bonus Annuity: pays a premium bonus amount when you buy the annuity or pay a premium, or an interest bonus added to the interest your annuity would normally earn. The bonus or increased interest is usually contingent on a policy condition such as remaining in force for a certain number of years, or annuitization (setting up periodic income payments). Please ask your agent to explain any conditions that must be satisfied to receive the bonus.
Buyer’s Guide: a document prepared by the National Association of Insurance Commissioners that provides information about annuities. The insurer is required to provide a buyer’s guide to each prospective purchaser for fixed and indexed annuities. For variable annuities, the insurer is required to provide a buyer’s guide (if available) or a policy summary, or a prospectus containing a policy summary.
Churning: Using the policy values in an existing life insurance or annuity policy to purchase another life or annuity policy with the same insurer for the primary purpose of generating additional commissions, without a reasonable assumption that the new policy will be much better.
Charitable Gift Annuity: the annuity contract between the insurer, the annuity owner, and the charity. A charitable gift annuity is intended to serve as a gift to a charity rather than income. The policy owner agrees to donate cash, stock, or other assets to a charity. In return, the owner receives a fixed payment (annuity) for life, plus tax benefits. Charitable annuities are not protected by FLHIGA and the donation is irreversible.
Longevity Annuity: also known as a “paid-up” annuity. This type of annuity provides protection against outliving your money late in life. They are usually purchased as a supplemental retirement investment. Once the payout begins, the annuity provides a regular amount of income for the rest of your life. If you die before you begin to receive payments, your heirs would not receive any benefits.
Maturity Date: the date on which the company must repay the principal. This term is most often used with life insurance policies and refers to the date the guaranteed cash value of the policy equals the face amount.
Policyowner: the person or entity that has the right to make changes in the contract. These include the right to surrender the policy and a change the beneficiary. The policy owner may or may not be the annuitant.
Prospectus: this document is prepared by the insurance company and reviewed by the Securities and Exchange Commission. It contains information about the purpose of the annuity, the separate account, the company’s investments and investment strategies. Purchasers of a variable annuity are required to receive a prospectus containing a policy summary, and entitled to a buyer’s guide.
Rider: Annuities may contain riders which add benefits to the contract, usually for an additional cost. An example may be a guaranteed income rider which guarantees a lifetime income regardless of the accumulated value of the annuity.
Twisting: is the practice of inducing a policy owner with one company to lapse, forfeit, or surrender a life or annuity policy for the purpose of taking out a policy in another company.
Surrender Charge: most annuity contracts charge a surrender penalty for withdrawals or surrenders that exceed the penalty free amount available, made during the early years of the contract. Usually the surrender penalty is a percentage of the amount withdrawn. The percentage declines each year until it reaches zero. Your annuity policy will contain a surrender schedule.