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annuity

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defined as a contract with an insurance company that provides for payments to the annuity owner over the life of the contract term.

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securities registration

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in addition to insurance license, variable annities also require a

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after tax dollars

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most annuities are funded with

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mortality guarantee

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the annuity company guarantees that it will make payments as long as the annuitant lives through a

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expense guarantee

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establishes the maximum they can charge the contract

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operating expense risk fee

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this is deducted from the separate account to protect the company against rising operating expenses

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death benefit

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in the event the contract owner dies during the accumulation period; the beneficiary will then receive the greater of the gross payments made into the contract or the accumulated value at the time of the owners deathe

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surrender value

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an annity can be terminated anytime during the accumulation period for its

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current value of the assets held in the separate account less any surrender charges

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the surrender value is

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immediate annuities and deferred annuities

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the two classifications of annuities are

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immediate annuity

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this can be funded ONLY with a single lump sum payment because the contract begins making payments to the annuitant on the first interval after deposit is received.

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one payment period after a lump sum deposit into the contract

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with an immediate annity payout to the annitant typically begins

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deferred annuity

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is an annity that either is purchased with a single lump sm or is purchased through periodic payments, payout is delayed until the contract is annuitized at some point in the future

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fixed annuity

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annuity has a guaranteed life product- fixed return/payment, guaranteed, company bears investment risk, vulnerable to inflation

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variable annuity

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annuity has variable life products, variable return/payments, not guaranteed, investor bears investment risk, and resistant to inflation

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lifetime income that will likely keep up with inflation

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the annuitants objective with a variable annity is to be provided with a

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investment management fee, mortality risk fee, expense risk fee, premium taxes, and administrative expenses

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these expenses are deducted from the asses or income of the separate account, these additional expenses include the following:

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investment company act of 1940

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this defines the separate account as an account established and maintained by the unsurance company under which income, gains and losses are credited to or charged against the account without regard to toerh income, gains or losses of the insurance company

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securities act of 1933

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the separate account in a variable contract is a pool of securities, much like a mutual fnd. it must be registered under the

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accumulation period

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this begins with the date on which the annuity contract becomes effective and contines until the payout period begins.

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accumulation unit

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this is the accounting measure used to identify the contract owner's interest in the separate accont during the accumulation period

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forward pricing

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new accumulation units are purchased using

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multiplying the number of accumulation units owned by the value of each accumulation unit

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an annuitants interest in a separate account is determed by

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annuity unit

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the annuity period begins at the conclsion of the accumulation period. the accounting measure used in the determination of the payments amounts to an annuitant during the payout referred to as an

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straight life or life annuity

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the option gives the annuitant the highest periodic payment, but carries the most risk. the annuitant receives payments as long as he or she lives. upon the annuitants death, all paymentds end

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life annuity with period certain

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(fixed period)- with this method, periodic payments are made to the annuitant for a specified number of years. if the annuitant dies before the end of the period the remaining payments due will be made in a lump sum or in installments to the beneficiary. the beneficiary will only receive money for however long the contract is

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unit refund life annuity

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this option provides periodic payments during the annitants lifetime. if the annuitant dies prior to receiving an amount equal to the value of the annuity units, the remaining portio will be paid in a lmp sum or instalments to the beneficiary

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joint and last survivor annuity

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with this option payments are made to 2 people. if one annuitant dies, payments ocntinue to be made to the surviving annuiant. this provides the largest promise but is the most expensive (provides the smallest monthly check)

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combination annuity

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this option is a good hedge against inflationand deflation because a protion of the contract pays fixed interest. while the remaining portion could be placed in a variable annuity, which offers inflation protection

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term insurance and permanent insurance

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life insurance policies are contractual agreements between the insurance company and the policy owner that can be classified into two basic types

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term insurance

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covers a specified period of time, typically 5,10, or 20 years. and provides ony a death benefit. this is suitable for those who wish to secure the most death benefit at the least cost

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permanent insurance

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provides a death benefit and an accumulatio of a cash value.

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death benefits

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these are proceeds of the policy to be paid to the beneficiary upon the death of the insured.

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cash value

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this represents the accumulated value that an insrance company will return to the policy owner upon the surrender of the policy

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premium payment

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the feed paid by the policyownder to the insurnce company in exchange for protection

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31 days

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the contract holder has this long to pay back enough of the loan to bring the cash value of the contract positive

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9 percent

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the maximum sales charge allowed on a variable life insurance policy is BLANK computed over a period of up to 20 years

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free look period

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if the life insurance policy is surrendered during the first 45 days, the contract holder will receive a full refund of the premims paid- called

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interest option

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the insurance company holds and invests the proceeds from the policy. the beneficiary receives a guaranteed interest rate from the company and usually also receives any excess interst earned.

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fixed period option

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the beneficiary receives equal installments are regular intervals for a specified time.

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fixed amount option

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the beneficiary receives periodic installments of equal dollar amounts until the proceeds are exhausted. the payets consist of both principal interest and are continued until all the funds have been exhausted

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life income option

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provides for a guaranteed income for the life of the beneficiary. payents are based on the actuarial calcualtions, and the amont is determined by which of the 4 types of life income options is selected

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straight life

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life income option: provides paymets for as long as the beneficiary lvies. payments cease at the beneficiary's death regardelss of the amount paid out

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cash refund

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life income ption: guarantees that the insurance pays out at least the amount of the original proceeds. in the event the beneficiary dies before all monies are received, the balance is paid to a secondary ebenficiary

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joint and last survivor income

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life income option: two beneficiaries receive lifetime income. when the first beneficiiary dies, payments continue uninterrupeted for the remainder of the joint beneficiary's life

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life settlement

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this term refers to any financial transaction in which the owner of a life insurance policy sells a policy that is no longer needed to a third party investor at a discount to its face value

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qualified plan

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require IRS approval and the dollars invested are before tax dollars

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nonqualified plans

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may discriminated and do not need IRS approval. these are generally after tax dollars

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deferred compensation

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a type of nonqualified plan in which the employer promises to pay compesation to the employee in the fture. plan is authorized under IRS code 457

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457 b

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is a nonqualified tax defereed account that is made available to employees of pblic institutions, such as state and local governments, and to private or nongovernmental tax exempt organizations. THERE IS NO 10% PENALTY ON EARLY WITHDRAWALS MADE BEFORE 59 1/2

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5,500 younger than 50 or 6,500 if older than 50

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the maximum amount an individual can contribute annually to an IRA is

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70 1/2

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contributions to a traditio IRA cannot be made past the age of

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rollover

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describes a cash and or asset contribution to a new IRA with an individual within 60 days of receiving an eligible rollover distribution from an old plan the individual is subject to 20% federal withholding onthe distribution from the old plan

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transfer

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describes a movement of cash and/or assets that takes place directly between the trustee/custodian of an old plan and the trustee of a new plan. by directly transferring the distribution from one custodian to another.

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6 percent

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if an idnividuals IRA contribution exceeds the maximum allowable amont, a penalty is assessed onthe ecvess contribtions every year until it is removed from the plan

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roth ira

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contributions may continue byond age 70 1/2. and all earnin may be withdrawn tax free as long as the acocunt is open for at least 5 years, and if the individual is at least 59 1/2

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keough plan

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qualified plans that are restrictd to self employed individuals. an individual opening this must include any employees if they meet certian requirements: they are at least 21 years old, have been emplyed at least 1 year work a minimum of 1,000 hour sper year, and are not seasonal workers.

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20 percent

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keogh plans allow for a maximum annual contributio of BLANK of pre tax earnings.

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sep

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allow self empolyed individiuals to contribte to their retirement in amounts greater than are available with traditional IRAs. an employer contributes directly to traditional individual retirement accounts for all eligible employees

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simple plan

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is available to smal businesses that employ not more than 100 employees. there is a mandatory employer dollar for dollar match of up to 3%.

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defied benefit plan

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the employer specifies an amount of benefis promised to the employee at his or her normal retirement date. the employer is responsbile for maintaining adequeate fund to provide the promised benefit.

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defined contribution plan

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have become mch more popuar because they are generally more flexibe and les expensive for employers to administer. these plans are focused on contributions rather than on the benefits they will pay out.

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401 k plan

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named after the IRS code that established the gidlines. constribtions are excluded from the individual employees gross income through a payroll dedction up to a specified maximum.

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vesting

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refers to the systematic transfer of ownership between the employer and the employee of the employers matching funds in a qualified retirement plan

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403 b

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this plan is referred to as a tax deferred annuity. is a qualified plan available to employees of certain nonprofit organizations.

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erisa

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governs corporate plans and union plans

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coverdell

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an education savings account. tax payers may deposit up to 2,000 a year.

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529 plan

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plan is a state sponsored college savings plan. no household limit contribution.

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long term debt instruments

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the general account is fundamentally invested in

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common stocks

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in a variable annuity, the issuer invests the monies in the separate account into a securities portfolio that consists mainly of

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units

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the voting rights are similar to mutual funds except instead of the votes being based on shares they are based on the number of

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sales and marketing expenses, administrative expenses and the other costs of distribution

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the sales charge of a variable annuity pays for

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assets or income of the separate account

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an annuity has other expenses that are not part of the sales charge, these epenses are deducted from the

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separate acounts nav after deducting any sales charges or other fees

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accumulation units are purchased at the

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annuitants age, life expectancy, settlement option selected, and the assumed interest rate

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the exchange rate of accumulation units into annuity units is a combination of factors that consider the

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75 percent of cash value after the policy has been in place for 3 years

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variable life policies permit loans against a percentage of the policy's cash value, the insurance company must allow a loan of a minimum of

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cash value of the policy minus any outstanding loans or unpaid interest charges

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the surrender value in a life insurance plan is the

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conversion privilege

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policyowners of life insurance have the right to exchange one form of permanent insurance policy for another type of permanent policy

annuities, life insurance, retirement, and college savings

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