Single Premium

Single premium is a lump sum, one-time-only payment into an annuity. Here one single lump sum payment is made to initialize an annuity contract.

State Insurance Department

It is an administrative agency that licenses insurers to do business in the state and implements state insurance laws and supervises the activities of insurers operating within any particular state.

Surrender Charge Period

Surrender Charge Period refers to the initial number of years, typically between five to ten, during which an annuity may have a surrender charge on early withdrawals or a time period imposed by the variable annuity provider, during which you will be subjected to a withdrawal charge for any funds that are withdrawn.

Surrender or Withdrawal Charges

Surrender or Withdrawal Charges are the charges for withdrawing money from an annuity before the date agreed upon in the contract. Surrender charges typically are a percentage of the total premium deposited, and the charge decreases to 0 over time as the annuity gets closer to the date it will mature.

Surrender Value

Surrender value is equal to the accumulated value less any surrender charges specified in the contract. Further it can be the amount available in cash upon surrender of a certificate before it becomes payable upon death or maturity.

In other words surrender value is the net amount you receive if you surrender your annuity for cash. This amount will be the principal plus interest less any prior amounts withdrawn and less the surrender charge, if any, which is deducted at the time of surrender.

Surrender Penalty

It is the penalty applied to any amount exceeding the free annual withdrawal amount or to multiple withdrawals within the same contract year if they are not allowed by the terms included in the contract.

Tax Deferral

In tax deferral investments earnings are free from taxation until they are withdrawn by the investor. It allows you to delay paying taxes on the growth in an annuity until you actually withdraw your funds, rather than paying taxes each year on the growth. As a result the annuitant earns additional interest on the money that would otherwise have been paid as taxes.

Tax Avoidance

Tax avoidance is a legal action designed to reduce or eliminate the taxes that one owes.

Variable Annuity

In variable annuity payments to the annuitant vary according to the changing market value of the underlying investment. Variable annuity is a type of annuity that allows the annuitant to select a number of different investment alternatives. The annuity proceeds are separated from the investments of the insurance company and are placed in a separate account. The insurance company accepts the mortality risk for the annuitant and guarantees payments for life once the contract is annuitized. Unlike a fixed annuity, the annuitant accepts the investment risk not the insurance company.