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One of the best ways to have annuities explained is
By admin | February 9, 2012
One of the best ways to have annuities explained is by reviewing some of the key terms associated with the product. I’ve listed a number of the key terms out in alphabetical order, and will continue to add to the list as I think of more. This list is by no means comprehensive, as there are near countless terms associated with annuity contracts.
Annuity Terms Annuitant – The annuitant is the person whose life is covered by the annuity account. Although there is relevance in annuity certain contracts as well, it is most pertinent to life annuity products. Annuity – A contract between an individual and an insurer in which the insurer promises to pay a series of payments for a predetermined period of time. Annuity Certain – An annuity certain is a type of annuity in which the insurance company makes payments for a certain period of time. Once those payments are made, the contract is terminated. Beneficiary – The beneficiary of the account is the person(s) designated to receive the payments from the annuity. Deferred Annuity – A deferred annuity begins payments to the beneficiary after more than one time period from the creation of the account, but more often several years into the future. Fixed Annuity – Fixed annuities is the oldest form of annuity on the market today. It is designed to provide a fixed dollar amount of income to the annuity’s beneficiary for the remainder of the life of the account. Variations of this annuity types can include fixed rate annuity, fixed income annuity, fixed index annuity, and a number of smaller variations amongst these. Immediate Annuity – An immediate fixed annuity is a contract type that is paid for with a single lump-sum premium and begins distributions one time period after the creation of the account. Depending on the type of account, this can mean payments either start one month after start date or one year. Indexed Annuity – An indexed annuity is a newer financial product that was introduced in the 1990′s. It is somewhat a hybrid of conventional fixed annuities and variable annuities. The indexed annuity bases upward growth of the account on the performance of a market index, most often the S&P 500. When the market is down, the account reverts back to a guaranteed minimum interest rate and behaves like a fixed annuity. This allows the investor to have an account that participates in market upswings, and avoids loss during market downswings. Joint Annuity – The joint annuity is a contract in which more than one individuals life is covered by the policy. The contract continues until the death of the first annuitant on the account. Joint and Survivorship Annuity – This account type is more common than the simple joint annuity as it allows for the account continuation to occur until the death of the last surviving covered member of the account. This type is frequently used for couples during retirement, and ensures that the remaining spouse is not left without this stream of income. Life Annuity – A life annuity is a type of contract that bases the longevity of the payments on the life of the annuitant. This ensures that they payments continue while the annuitant is still alive. Participation Rate – The participation rate of the annuity refers the amount of participation the insurer provides the annuity owner during market upswings in an indexed annuity. Surrender Charges – The surrender charges are important to understand in your annuity contract. This is one of the more criticized aspects of the annuity, as these contracts have outrageously high cancellation fees. It is usually most prudent to commit to your annuity fully and frivolously taking out funds. Variable Annuity – The variable annuity is a controversial annuity product. Originally designed to help combat the effects of inflation on the fixed annuity, the variable annuity also ties performance to the markets. The variable annuity ties its account value and distribution sizes to the performance of the underlying portfolio of stocks. Unlike the indexed annuity, when the market drops, the variable annuity drops as well. This makes the product fall into the realm of securities, and adds an additional level of risk to the transaction. Again, this list is certainly not comprehensive.If you have any suggests as to additional terms that should be added to the list, leave a comment and brief description.
Much more information on what an annuity is, how an annuity calculator can help you and how to get the best annuity rates, can be found in the major search engines. Please make sure you do your research before you part with your money
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