Glossary/Terms

ACCUMULATION PERIOD:

The time period beginning when the Deferred Annuity is opened and ending when the Payout Phase begins. During this period, interest accumulates free of any current income taxes.

ANNUITANT:

The individual upon whose life the Deferred Annuity is based, and the individual that will receive the Annuity Payments when the Payout Phase begins. Generally the Annuitant and Annuity Owner are the same individual. Joint Annuitants are allowed for Annuity Payments after the Payout Phase begins. Only at the death of the Annuitant is the Death Benefit paid to the Beneficiary.

ANNUITY OWNER:

The person who purchases the Annuity. The Owner may be more than one individual, or a trust (special rules apply for “nonnatural” Owners). The Owner may also be the Annuitant or the Beneficiary. There is no limit to the number of Owners on any one contract.
The Owner has the following rights during the lifetime of the Annuitant:  The right to designate the Annuitant.

The right to designate the Beneficiary.
The right to designate the Annuity Payout Starting Date.
The right to designate the Settlement Option.
The right to make early withdrawals or surrender the Annuity.
The right to make an assignment or name another Owner.
For IRA, Keogh and teacher salary reduction plans the Owner and Annuitant have to be the same individual.

ANNUITY PAYMENTS:

After the Annuity Payout Phase begins, these are the guaranteed periodic payments that are paid to the Annuitant during the Annuity Payout Period.

ANNUITY PAYOUT PERIOD:

The period of time that the Annuity Payout Phase lasts. Generally the Payout Period cannot be changed after it has been selected.

ANNUITY PAYOUT PHASE:

The phase when the Annuity Payments are paid to the Annuitant on a periodic basis according to the method selected by the Owner. For an Immediate Annuity, this phase begins within 12 months of the Certificate Date. For a Deferred Annuity, this phase begins after the Accumulation Period.

ANNUITY PURCHASE VALUE:

At any time, this is the total premium plus accrued interest less any amounts withdrawn, previous withdrawal penalties or premium tax — if any. This is also known as the Contract Value, Full Value or Total Annuity Value. It is not just the amount of the single or flexible premium. This is the amount you have available to you should you choose a payout option.

ANNUITY START DATE:

This is when the Payout Phase begins.

BENEFICIARY:

The person designated by the Annuity Owner to receive payments under this contract upon the death of the Annuitant. The benefits to any Beneficiary who dies before the Annuitant will terminate at the death of that Beneficiary. The Beneficiary may be an organization, individual or individuals. The Beneficiary may also be the Owner when the Owner is not the Annuitant.

PRIMARY BENEFICIARY:

The first person(s) designated by the Owner to receive the proceeds at the death of the Annuitant.

CONTINGENT BENEFICIARY:

The person(s) designated to receive any benefits due in the event the Primary Beneficiary dies prior to the death of the Annuitant. If both the Annuitant and the Primary Beneficiary are deceased and no Contingent Beneficiary is designated, the payments will be paid to the estate of the Annuitant.

IRREVOCABLE BENEFICIARY:

The person designated by the Owner in an irreversible decision to receive the proceeds in the event of the Annuitant's death. The Owner then gives up all rights to make any further changes in the Beneficiary.

CASH SURRENDER OF THE CONTRACT:

At any time, the Owner may surrender the Annuity Contract for the entire Cash Value of his or her accumulated funds, less any applicable withdrawal charges. The interest portion of the amount received will be subject to current taxation.

CASH VALUE:

The amount available for partial withdrawals or complete surrenders. This is the Annuity Purchase Value less any amount deducted as an interest penalty for partial or complete withdrawals. The applicable interest penalties are set forth in the contract.

CERTIFICATE DATE:

The date on which the Annuity was purchased.

CONTINGENT OWNER:

To aid in the transfer of ownership of an Annuity, a Contingent Owner is named to be the new Owner once the Owner dies. This only works in certain situations, and we recommend a tax counselor be consulted before a Contingent Owner is named.

CONTRACT YEAR:

Also known as "Year". It is each successive one-year period from the date the Deferred Annuity is purchased.

EARLY WITHDRAWAL:

This is whenever you take money out of the Deferred Annuity during the Accumulation Phase. Most policies will have an early withdrawal penalty during the first several policy years. Except by means of a Tax-Free Exchange (1035), the Annuity Owner will owe income tax for interest received.

FLEXIBLE PREMIUM DEFERRED ANNUITY (FPDA):

This is an Annuity where you can make additional deposits anytime prior to the beginning of the Payout Phase. Any interest earned in the Annuity will accumulate tax deferred until such time as it is withdrawn.

GUARANTEED MINIMUM INTEREST:

A minimum interest rate that is guaranteed for the entire life of the contract.

IMMEDIATE ANNUITY:

An annuity in which the Annuity Payout Period begins immediately or within one year of the initial premium purchase.

JOINT ANNUITANTS:

Used when the Annuity Payout is to last for the lives of two individuals — usually husband and wife. The insurance company does not permit the use of Joint Annuitants for Deferred Annuity contracts.

NON-QUALIFIED FUNDS:

After-tax dollars that are simply held in a regular savings account or contributed to an after-tax savings plan like a Roth IRA.

POLICY YEAR:

Each 12-month period between policy anniversary dates.

PREMIUM:

The payment an Annuity Owner agrees to make in return for an Immediate or Deferred Annuity.

QUALIFIED FUNDS:

Pre-tax dollars contributed to an IRS-approved savings plan.

QUALIFIED PLANS:

IRS-approved savings plans such as IRA, HR-b or Keogh, Pension or Profit Sharing Plans, Deferred Compensation and Salary Reduction Plans. The Qualified Plan is just the tax law. You then select a Deferred Annuity to be the Qualified Plan Investment.

SETTLEMENT OPTION:

The type of guaranteed payment you select when you move a Deferred Annuity into the Payout Phase. This action is also called annuitizing a Deferred Annuity.

SINGLE PREMIUM DEFERRED ANNUITY (SPDA):

This is an Annuity where only a one-time payment of premium is allowed from the beginning of the Accumulation Period to the Payout Phase. Unlike a Flexible Premium Annuity, you cannot make additional deposits to the policy. You would have to open a new and separate policy in order to make an additional deposit. Any interest earned in the Annuity will accumulate tax deferred until such time as it is withdrawn.

TAX DEFERRAL:

A postponement of current state and/or federal income taxes until a later date.

TAX-DEFERRED ANNUITY:

A contract between an individual and an insurance company in which the individual invests in an Annuity once or over a period of time (called the Accumulation Phase). While in the Accumulation Phase, the interest earned accumulates free from any federal, state or local taxes. Upon the Annuitant's request, the Annuity begins to pay out to the Annuitant in fixed payments over a period of time or in a lump sum (called the Payout Phase). While the term “Annuity” technically refers to the guaranteed periodic payments, it is also used to reference a Deferred Annuity.

TAX-DEFERRED INTEREST:

Interest that is not currently subject to state or federal income taxation.

TAX-FREE EXCHANGE:

A means by which you can transfer the full value of one Deferred Annuity to another Deferred Annuity without any tax penalties. With this method you will not have constructive receipt of your funds and thus the transfer will not be considered a taxable withdrawal. (For Non-Qualified Deferred Annuities the rules of I.R.C. Section 1035 are used. This exchange is allowed by Revenue Ruling 73-124, Code Section 1035. This ruling does not apply to Qualified Plans.)