Glossary
Single-Premium Annuity (SPA). An annuity contract that is purchased with a single premium payment and will begin making payments within one year after the contract's issue date.
Joint Life Annuity. A policy that covers two or more lives and makes annuity payments to two or more annuitants is called a joint life annuity. Sometimes the payments stop with the first death and sometimes with the last death.
Fixed annuity. Under the terms of a fixed annuity, the insurance company agrees to credit the annuity with a guaranteed minimum interest rate. There is no market risk to your premium.
Immediate annuity. These annuities offer the same type of minimum interest rate guaranteed by a traditional fixed annuity, but have the potential to credit additional interest based in part on the performance of a market index.
Single-Premium Immediate Annuity (SPIA). An annuity that begins providing you with income right after you pay a single premium. Also known as a SPIA.
Variable annuity. A variable annuity is a contract in which the cash value of the policy fluctuates in response to the performance of the policy's underlying investments. Generally, there is a minimum guaranteed death benefit in variable annuities.
Fixed indexed or indexed annuities. These annuities offer the same minimum interest rate guaranteed by a traditional fixed annuity, but have the potential to accrue additional interest based in part on the performance of a market index.
Beneficiary. The person, persons or organization designated to receive the death benefit of an annuity.
A primary beneficiary is your first choice to receive policy proceeds. Contingent beneficiaries receive earnings in the event of the death of the primary beneficiary.
Death Benefit. The amount of money paid to the beneficiary of an annuity
Surrender position. A surrender charge can mean an amount charged to the owner of an annuity contract when he or she prematurely withdraws part or all of the accumulated value of the contract.
Age attained. The age the insured has reached since the original issuance of the policy is the age reached.
Compound interest. Compound interest is the interest rate earned on both the amount of the original capital and the accumulated interest of previous periods.
Lump sum payment. The total payment of an annuity policy to the annuitant in one lump sum, rather than installment payments, is a lump sum payment.
Accumulation period. An accumulation period is the time between the first premium payment and when payment begins. During this time, premiums paid on the contract "accrue" with interest.
Flexible premium. A flexible premium annuity allows the contract owner to make multiple premium payments in one annuity.
Premium. The amount paid to the insurance company to purchase the annuity. Paid in a lump sum or in installments.
Principal. The total amount of premium paid on an annuity.
Deferred annuity. A deferred annuity is an annuity contract where periodic payments do not begin until some future date chosen by the owner of the annuity.
Life. "Life only" refers to an immediate annuity or settlement option in which regularly scheduled payments are made from the time the distribution begins. These payments continue until the end of the beneficiary's life. No payments will be made after the beneficiary dies.
Basic rate. This is the anticipated rate that is credited in the second year of an annuity contract. The prime rate is not a guaranteed rate and may differ from the actual interest that is credited at the time the contract reaches its second year.
Participation rate. For an indexed annuity, the participation rate is the amount of profit from an index that will be credited to the value of the policy.
Renewal rate. The interest rate that applies to the portion of the policyholder's account balance that is no longer in the new monetary period as defined in the insurance contract is the previous monetary rate or the renewal rate
Ransom value. The surrender value is the amount of cash the contract owner is entitled to collect upon termination of the annuity contract prior to maturity or death.
Cash value. The amount of money in an annuity that, with some limitations, is available to the contract owner in the form of withdrawals, loans, guarantees, or surrender of the policy. Also known as Cash surrender value or CSV.
Life with period. Refers to an immediate annuity or annuity settlement option in which annuity payments are made for life. However, there is a minimum guaranteed number of payments that will be made to the beneficiary if the beneficiary dies within a specified period of time.
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