Annuity

Annuity is a contract sold by life insurance companies in which one receives payments on an investment for a lifetime or for a specified number of years. In the simplest term, you pay a sum of money, either a lump sum or a series of payments and the insurance company makes periodic payments to you, beginning on the date in your contract and continuing for the rest of your life or for a specified period. The earnings on annuity payments are not taxable during the accumulation phase of your agreement, but are taxable as income when you receive them.

Annuitant

Annuitant is the person entitled to receive annuity payments or who receives them. The annuitant is generally also the policyholder.

Annuitization

Annuitization is the process of converting an annuity from a single sum to the guaranteed monthly, annual or some other periodic income payments from the annuity.

Administrative Fee

Administrative fee is also known as asset fee or account fee. It is usually 1 to 2% of assets under management which a professional financial manager charges to administer a brokerage account or funds placed in an annuity.

Annual Reset

Annual reset is a provision contained in some equity-indexed annuity which locks in the gains at the end of each year and resets the index starting point for the following year.

Annuity Certain

Annuity certain is a contract that provides an income to the annuitant or the beneficiary (if the annuitant dies) for a specified number of years, regardless of the policyholder’s life or death.

Asset Allocation

Asset allocation is a term used in annuity that means distribution of assets across multiple classes, like:- stocks, bonds, cash, in order to meet an individual’s financial goals in terms of risk and length of investment.

Abusive Tax Shelter

Abusive tax shelters are transactions promoted for the promise of tax benefits with no meaningful change in a taxpayer’s income or assets. These transactions typically have no economic purpose other than reducing taxes with predictable tax losses or tax consequences. Abusive tax schemes may involve the use of multiple layers of domestic and foreign pass-through entities such as Trusts, Partnerships and Limited Liability Companies.

Beneficiary

The person or financial instrument like a charity or trust fund, named in the policy as the recipient of insurance proceeds in the event of the policyholder’s death is called beneficiary.

Bond Strategy Annuity

This is a type of fixed-deferred annuity which offers a guaranteed minimum interest and allows the client to select from various investment strategies which are designed to follow a particular bond-index. There is no guarantee that the insurance company will actually declare interest rates similar to the major index.