Accumulation period
The period between the time you make your purchase payment and annuitization, when your annuity is accumulating interest and value.

Administrative fees
Fees that cover the cost of administering and maintaining an annuity contract or life insurance policy.

Annuitant
The person upon whose life expectancy the annuity payments are based.

Annuitization
Converting the value of the annuity contract into a stream of income, either for a lifetime or a specified period of time.

Annuity
A contract that can make payments to you at regular intervals based on purchase payments that you put into the contract.

Asset
Property owned that has value, such as a home, car, stocks or bonds.

B

Base interest rate
The minimum indexed interest rate you earn during a term for a fixed-indexed annuity.

Beneficiary
The person, institution, trustee or estate that you designate to receive benefits from your annuity or life insurance policy if you die.

C

Cap
The maximum indexed interest rate that can be credited during a term of a fixed-indexed annuity.

Cash value
The amount payable upon cancellation of a policy or contract. You may also be able to borrow against this amount.

Contract anniversary
The anniversary of the day the contract was issued.

Contract owner
The person who purchases the annuity and has all rights to the contract.

D

Death benefit
With respect to annuities, this provision typically states that if you die before the annuity payments start, the contract value will be paid to your beneficiary. With respect to life insurance, it is the amount payable to the beneficiary under the policy upon the death of the insured.

Declared interest rate
A rate set by the company at the start of a term or on a go forward basis.

Declared rate strategy
Credits interest daily at a rate declared in advance of a term for a fixed-indexed annuity contract.

E

Early withdrawal charge
Often referred to as a surrender charge, this charge applies if you surrender your contract or withdraw an amount in excess of the free withdrawal allowance. The charge is equal to the amount subject to the charge multiplied by the applicable rate. The percentage rate may be reduced or eliminated after the contract has been in force for a certain number of years.

Easy systematic payment program
A non-contractual program in which you have the option to request regular income payments from your annuity before the early withdrawal charge period ends without incurring a charge.

F

Fixed annuity
This type of annuity offers the stability of a fixed interest rate that is determined by the company and is guaranteed to never be below a minimum interest rate.

Fixed-indexed annuity
A variation of a traditional fixed annuity that gives you the opportunity to earn interest at an interest rate that is determined according to a formula based, in part, on the change of a referenced index.

Flexible premium annuity
An annuity that accepts periodic purchase payments, which can usually be made at any time.

Free look period
Period of time after an annuity contract is issued and delivered when the owner may cancel the policy or contract without penalty and receive either the initial payment or the current value of the annuity.

G

Guaranteed death benefit
Death benefits that are typically enhanced and guaranteed to be paid to the beneficiary(ies) under certain annuity contracts, provided the contract owner satisfies all purchase payment and contract requirements.

Guaranteed withdrawal benefit rider
Based on your selection at contract issue, the guaranteed withdrawal benefit rider provides guaranteed income for either a lifetime or a period of time, regardless of market performance. Before you take income, the benefit base amount, on which payments are based, increases annually at a percentage outlined on your rider's specifications page. When you start income withdrawals, you receive a percentage of the rider's benefit base amount each year. There is an annual charge for this rider.

I

Immediate annuity
An annuity that provides you with a stream of periodic income payments immediately after you purchase it.

Indexed interest rate
For a fixed-indexed annuity contract, the rate of interest is determined and credited to the amount remaining in an interest strategy on the last day of the term using a formula that is based on the index method and rules that apply to that strategy.

Issue age
The age of the contract owner at the time the contract is issued.

J

Joint and one-half survivor annuity
This annuity option offers payments of a fixed amount over the lifetimes of two payees. After the death of the primary payee, the secondary payee receives 50 percent of the original payment amount for the remainder of his or her lifetime. If the secondary payee is the first to die, there is no reduction in the payment.

M

Monthly Averaging Strategy
A monthly averaging strategy compares the average of the closing index values at the end of each month-long period during the term to the closing index value on the first day of the term. If the result is positive, interest is credited, subject to the cap. If the result is negative, the credited interest rate is 0%. 

Monthly Sum Strategy
A monthly sum strategy compares the closing value of the index at the end of a month-long period to the closing value at the beginning of that month-long period. Positive monthly changes are subject to a cap, but negative monthly changes are not limited. The credited interest rate is the sum of the 12 monthly index changes for that term, but not less than 0%.

N

Non-qualified annuity
An annuity purchased with after-tax dollars.

P

Partial withdrawal
An amount withdrawn that is less than the cash value. A withdrawal may be subject to fees and taxes.

Participation rate
The percentage of index growth that is used to calculate the indexed interest rate.

Payout options
Payment options you can choose when annuitizing your contract or your beneficiary can choose at the time of a claim under a contract or a life policy. Payout options are referred to as settlement options in some annuity contracts.

Point-to-point Strategy
A point-to-point strategy compares the closing value of the index at the end of the term to the closing value on the first day of the term. If the result is positive, interest is credited, subject to the cap or participation rate. If the result is negative, the credited interest rate is 0%.

Purchase payment
The amount you pay in exchange for an annuity contract.

Q

Qualified annuity
An annuity contract bought with pre-tax dollars as part of a tax-qualified retirement plan.

R

Required minimum distribution (RMD)
The minimum annual required distribution amount for an IRA holder who reaches 70 1/2. All annuity contracts are subject to the required distribution rules of federal tax law. These rules vary based on the tax qualification of the annuity contract or the plan under which it is issued.

S

Settlement options
Payment options you can choose when annuitizing your contract or your beneficiary can choose at the time of a claim under a contract or a life policy. Settlement options are referred to as payout options in some annuity contracts.

Single premium annuity
An annuity contract that accepts a single purchase payment or multiple purchase payments for a limited period..

T

Tax deferral
The annuity contract is generally tax deferred, which means that you are not taxed on the earnings in your contract until the money is paid to you. Contracts owned by non-human owners, such as trusts or corporations are subject to special rules.

Tax qualification
Annuities may also qualify for tax-deferral treatment or serve as a funding vehicle under tax-qualified retirement plans that are governed by the Internal Revenue Code. Contributions to a tax-qualified annuity are typically made with pre-tax dollars while contributions to other annuities are typically made from after tax dollars. Tax-qualified annuities may also be subject to restrictions on withdrawals that do not apply to other annuities. Examples of tax qualifications include IRA, TSA, SEP and SIMPLE.

Term
For a fixed-indexed annuity, the period of time over which an interest rate is calculated for an indexed strategy and fixed for a declared rate strategy.

V

Variable annuity
An annuity that allows the contract owner to allocate the purchase payment to a series of sub-accounts tied to stocks or bonds that are similar to mutual funds.