Premature Distribution

Premature distribution is also called premature withdrawal. It is termed as premature if the withdrawal of cash from an annuity takes place before the owner reaches age 59 1/2, unless he or she is disabled or dies. Withdrawals of taxable amount prior to age 59 1/2 are subject to a 10 percent federal tax penalty. Early withdrawals are usually also subject to a certificate surrender charge.

Premium

The payment, or the regular periodic payments, that a certificate holder makes to own a life insurance certificate or annuity is called premium. The modes of payment may be monthly, quarterly, semiannual or a single premium payment.

Price/Earnings (P/E) Ratio

Price/Earnings (P/E) Ratio is a financial ratio which is commonly referred to as the P/E ratio. This is the relationship of a company's stock price divided by earnings per share. It provides investors with an indication of how much is being paid for a company's earnings potential.

Principal

Principal is the amount of money you put into an investment or the amount you pay into your annuity contract as distinguished from the earnings that are credited to it is called principal. May also be referred to as purchase payments or contributions.

Probate

The court-supervised process of administering a will or the legal process used to validate a will. This can be a time consuming and expensive process which can be reduced or eliminated through proper estate planning.

Qualified

Qualified is an annuity contract you generally buy with pre-tax dollars as part of a tax-qualified retirement plan that are Approved by the IRS for inclusion as an investment in Keogh plans, IRA's, and other IRS-approved pension plans.

Reserve

The amount required to be carried as a liability in the financial statement of an insurer to provide for future commitments under policies outstanding is called reserve.

Reserve Pool

A system of insurance companies which assumes the liabilities of a defunct member company. Almost every state requires insurance companies doing business in it to become part of the state’s legal reserve pool. This pool protects investors and the insured.

Separate Account

An asset account established by a life insurance company separate from other funds, used primarily for pension plans and variable life and annuity products. This arrangement permits wider latitude in the choice of investments, particularly in equities.

Settlement Options

One of several ways, other than immediate payment in a lump sum, in which the insured or beneficiary may choose to have policy proceeds paid.