Bonus Annuity

It is a type of fixed-deferred annuity which offers an additional bonus, in the form of additional interest or additional principal, in the first year of the contract. It is typically between 1 to 5%.

Back-End Charge

Back end charge is also called surrender charge, it is a fee incurred by an investor for cashing out early on a deferred annuity or variable annuity usually within the first 7–10 years after investing.

Bailout Provision

Bailout provision is a clause found in an annuity contract that enables the owner of that contract to withdraw the money without surrender penalties subjected to some pre-determined conditions.

Benchmark Index

The index that measures the performance of market allocations in a variable annuity. It also compares performance between a variable annuity and an investment portfolio.

Bonus Rate

Bonus rate is the extra percent of interest credited to an annuity during its first year. This extra amount is above the interest rate to be credited from the beginning of the second year and the remaining years that the annuity is in force. It is paid in the first year as an effort to attract new Annuitants.

Cap

Cap is the maximum interest rate which will be credited under the annuity contract in an equity-index annuity each year regardless of the increase in the equity index.

Capital Gains

Capital gain is the gain in value of certain investments over and above the initial amount paid into the investment. It is subject to a different tax rate than ordinary income. In many cases the capital gains tax rate is lower than the income tax rate for an individual.

Cash Value

It is the amount available in cash upon surrender of a policy before it becomes payable upon death or maturity.

CD or Certificate of Deposit

CD or certificate of deposit is a popular savings instrument offered by banks which guarantees a fixed interest rate for a specific period of time. The time period could be 90 days, six months, one year, three years, five years etc.

Compound Interest

Compound interest is the interest computed on the accumulated unpaid interest as well as on the original principal. In this process, interest already earned is reinvested so that a larger amount earns more interest.