Session 8 Flashcards
(44 cards)
Annuity
is generally a contract between an individual and a life insurance company, usually purchased for retirement income
Combination Annuities
attempts to provide a monthly payout that consists of guaranteed fixed amounts as well as a payout that might keep pace with inflation
Index Annuities (IA)
credits interest to the owner’s account using a formula based on performance of stock or index. Guaranteed against loss and max capped
Deferred Annuity
an annuity may be purchased with a single lump-sum investment
Periodic Payment Deferred Annuity
allows a person to make periodic payments on monthly, quarterly or annually basis
Immediate Annuity
are purchased by depositing a single lump sum
How long does it take for a payout for Immediate Annuity?
60 Days
Accumulation Stage
is the pay in period…if you miss a payment you wont forfeit the annuity
Accumulation Units
is an accounting measure that represents an investor’s share of ownership in the separate account
Sales charges and Variable annuities
there is no max…just has to be reasonable
Annuity Pay Out Options (4)
1- Life Annuity/ Straight Life/ Pure Life
2- Life Annuity w/ Period Certain
3- Joint Life with Last Survivor Annity
4- Refund Annuity
Life Annuity/ Straight Life/ Pure Life
biggest payout…the annuitant receives periodic payments over his lifetime
Life Annuity w/ Period Certain
an annuitant receives payments for life, with certain minimum period guaranteed
Joint Life with Last Survivor Annity
covers two or more people and payout is conditioned on both lives
Refund Annuity
payments will continue after death of the insured until the full value of the initial premium has been returned
Mortality Guarantee
annuity companies guarantee payments for as long as annuitants live
Operating Expense Guarantee
insurance companies must project their own expense and set a ceiling for fees
Assumed Interest Rate (AIR)
usually conservatively provides an earnings target for the separate account
Variable Annuity Payouts
are determined by mortality tables and value of the account (aren’t guaranteed)
Taxation of Annuities
since the contribution for annuities are made after tax only the earnings are taxed upon withdrawals
9 Advantages of Variable Annuities
1- Tax- Deferred Growth 2- Guaranteed Death Benefit 3- Lifetime Income 4- IRS Section 1035 5- No 70 1/2 age restriction 6- No contortion limit 7- Choice of 25-30 different subaccounts w/ different objectives 8-Tax-free transfer between subaccounts 9- No probate
IRS Section 1035
you can exchange from an annuity without an tax consequences
Term Insurance
is protection for a specified period…offers pure protection and is the least expensive
5 Main Points of Term Insurance
1- Provide temporary insurance protection for specified period
2- They pay the death benefit only if the insured dies during the term of coverage
3- Don’t accumulate cash value
4- Death Protection and premium remain level for the specified term
5- If renewed at the end of the term, the face amount remains the same but the premium will be based on age (Always increase)