- accumulation unit
- A unit used to measure the value of the separate account of an annuity during the accumulation phase.
- accumulation unit value
- The value of each accumulation unit at the end of each valuation period for a variable annuity.
- A person whose life determines the income benefits from an annuity, either for life or for a specified period of time. There may be one or two annuitants; one is the primary annuitant and the other is the joint annuitant. (See: joint annuitant.)
- The payout period on an annuity.
- A tax-deferred investment sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement.
- annuity date
- The date annuitization must commence.
- annuity payment option
- A specification under which a series of annuity payments are made to the annuitant or other payee.
- annuity unit
- A share of a variable annuity paid to an annuitant in the form of an income payment.
- asset allocation
- The spreading of investments across a variety of assets, typically stocks, bonds, real estate and cash.
- asset class
- A specific type of investment, such as growth stocks or high-yield bonds.
- asset rebalancing
- Over time, certain investment options will perform better than
others, causing a shift in allocation percentages. Asset rebalancing periodically
returns the contract to its original allocation percentages.
- An individual, institution, trustee or estate that receives funds, property, or other benefits from a contract such as an insurance policy, a will, a retirement plan or an annuity.
- cash value
- The amount available in cash upon cancellation of an insurance policy -- usually a permanent life policy -- before it becomes payable upon death. Also known as "cash surrender value" or "surrender value."
- death benefit
- A payment made to a beneficiary from an annuity or policy following the death of the policyholder. Also known as "survivor benefit."
- deferred annuity
- An annuity in which the annuitant delays income payments until some point in the future.
- Distributions to policyholders of participating policies as declared by the board of directors.
- dollar cost averaging
- A practice of investing equal amounts of money on a regular basis, regardless of market performance. The objective of dollar cost averaging is to purchase more shares when prices are low, fewer when prices are high, with the net effect of reducing the average cost per share.
- estimated earnings growth rate
- A weighted average of the estimated long-term earnings growth (over three to five years) for companies in a fund's portfolio. The earnings estimates are a consensus of industry analysts' estimates.
- fixed annuity
- A tax-deferred investment that guarantees a fixed payment to an annuity holder, either for a lifetime or a specified period of time.
- Periodic, equal-sized payments made to an insurance company for coverage.
- "free look" period
- By law, policyholders have a specified period of time to examine an insurance policy. If they are not satisfied, they have the right to return the policy and receive a full refund of the initial premium.
- Guaranteed Interest Account (GIA)
- An investment option under which premium amounts are guaranteed to earn a fixed interest rate.
- immediate annuity
- An annuity that begins payout after a single payment is made. Also known as "immediate payment annuity."
- investment option
- Accounts in which one may allocate investment dollars. Investment options,
whose values fluctuate due to market risk, are offered in "variable" products including life
insurance and annuities. There are a variety of investment options to align with an investor's
financial goals and willingness to accept risk.
- joint annuitant
- A person other than the primary annuitant whose life determines the income benefits from an annuity, either for life or for a specified period of time. There may be one or two annuitants; one is the primary annuitant and the other is the joint annuitant. (See: annuitant.)
- lapsed policy
- Termination of a policy due to failure to pay a premium and lack of adequate cash value to keep the policy in force.
- life insurance
- A policy that provides protection against the death of an individual in the form of payment to a beneficiary -- usually a family member, business or institution.
- Market Value Adjusted Guaranteed Interest Account (MVA)
- MVAs pay interest at a guaranteed rate for a specific period if held for the full guarantee period. If amounts are withdrawn, transferred or annuitized before the end of the guarantee period, a market value adjustment will be made to reflect changes in the interest rate environment from the beginning of the guarantee period. Depending on the market, the amount withdrawn is then adjusted, either up or down.
- Modified Endowment Contract (MEC)
- A modified endowment contract or MEC is a life insurance contract that, for federal income tax purposes, is funded in a way that violates the "7-pay" test under Section 7702A(b) of the Internal Revenue Code. In that case, lifetime distributions from the policy are taxed under less favorable annuity-like rules rather than the more favorable rules for distributions from non-MEC life insurance policies. (See: )
- Net Asset Value (NAV)
- The market value of one mutual fund share, calculated on a daily basis.
- nonqualified plan
- A retirement plan that does not meet the requirements of Internal Revenue Code Section 401(a), and is therefore not qualified for favorable tax treatment. (See: qualified plan.)
- permanent life insurance
- Life insurance that provides coverage for an individual's entire life (as opposed to a specified term). Permanent life insurance offers tax-deferred accumulation and income-tax-free-death-benefit. Universal, variable universal and whole life insurance are all forms of permanent life insurance.
- Payment for insurance coverage, typically made in annual, semiannual, quarterly or monthly increments.
- A required legal document that offers securities or mutual fund shares for sale. The Securities Act of 1933 requires that a prospectus explain the terms, issuer, objectives (if a mutual fund) or planned use of the money (if securities) and historical financial statements included in the offer.
- qualified plan
- A retirement plan that meets the requirements of Internal Revenue Code Section 401(a), making it eligible for favorable tax treatment. (See: nonqualified plan.)
- reinstatement (of a policy)
- If a policy has lapsed due to nonpayment of premiums after the grace period has expired, it may be reinstated. To reinstate a policy, the insurance company typically requires the insured to show evidence of continued insurability (take a medical exam, for example), to pay all past premiums plus interest due, and to reinstate or repay any outstanding loans.
- Benefits paid from a life insurance policy.
- split dollar
- An arrangement under which an employer and an employee can split the benefits and costs of a permanent life insurance policy.
- surrender charge
- A fee imposed on a policyowner when a life insurance policy or annuity is terminated for its cash value. (See: cash value.)
- surrender value
- (See: cash value.)
- survivor benefit
- (See: death benefit.)
- term life insurance
- Life insurance that provides coverage for a specified period of time. It does not accumulate cash values.
- universal life insurance
- Permanent life insurance that combines the low-cost protection of term insurance with a savings element that is invested by the insurance company in a tax-deferred account, the cash value of which may be available for a loan or withdrawal to the policyholder. (See: permanent life insurance.)
- variable annuity
- A tax-deferred investment that pays a variable rate of return,
unlike a fixed-rate annuity that pays a fixed rate of return. Owners of variable
annuities may, based on their risk tolerance, select from a variety of investment
- variable universal life insurance
- Permanent life insurance that combines features of universal life insurance -- such as premium and death benefit flexibility -- with features of variable life insurance -- such as additional investment choices. Variable universal life insurance usually accumulates cash values. (See: permanent life insurance.)
- whole life insurance
- A permanent life insurance policy that remains in full force and effect throughout the life of the insured, with fixed premium payments being made for the same period. (See: permanent life insurance.)
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