1035 Exchange

In the United States, a “1035 Exchange” refers to a tax- free replacement of an insurance policy for another insurance contract that covers the same person.


Accumulation Period

An accumulation phase is the time between the first premium payment and when the payout begins. During this time, the premiums paid into the contract “accumulate” with interest.


The natural person or persons (collectively, Joint Annuitants) whose life or lives is/are used to determine the Annuity Payments under the Contract. The owner of the annuity controls the payments and is often the same person as the annuitant.


The process of converting an annuity investment into a series of periodic income payments. Annuities may be annuitized for a specific period or for the life of the annuitant.


Long Term retirement savings product that can help protect you from outliving your money.

Annuity Payment

A series of periodic income payments as determined by the Settlement Option elected.


Basis Points

A basis point is a unit of measurement used when discussing interest rates; one hundred basis points equals 1%.


The person, persons or organization designated to receive the death benefit of an annuity. A primary beneficiary is your first choice to receive proceeds from the policy. Contingent beneficiaries receive proceeds in case the primary beneficiary(ies) dies.


Cash Value

The sum of money in an annuity that is, with some limitations, available to the policy holder in the form of withdrawals, loans, collateral, or upon surrendering the policy. Also known as the Cash Surrender Value or CSV.


For an indexed annuity contract, the cap is an upper limit on the amount of an index’s gain in value that will be credited to the annuity value.

Compounding Interest

Compounding interest is the type of interest that is earned on both the original principal amount and on the interest accumulated from earlier periods.


Death Benefit

The sum of money paid to a beneficiary of an annuity.

Deferred Annuity

A deferred annuity is an annuity contract where periodic payments do not begin until some future date elected by the annuity owner.


Fixed Annuity

Under the terms of a fixed annuity, the insurance company agrees to credit a guaranteed minimum interest rate to the annuity. There is no market risk to your premium.

Fixed Indexed or Index-Linked Annuities

These annuities offer the same type of minimum interest rate guaranteed by a traditional fixed annuity, but have the potential to credit additional interest based in part on the performance of a market index.


Joint-Life Annuity

A policy that covers two or more lives and makes annuity payments to two or more annuitants is called a joint-life annuity. Sometimes payments cease at the first death and sometimes at the last death.


Life Only

This is an income option in which regularly schedule payments are made from the time distribution is initiated. These payments then continue through the end of the annuitant’s life.

Life with (10- year) Period Certain

This is an income option in which payments are made during the guaranteed period whether or not the annuitant is living. Payments continue after the guaranteed period as long as the annuitant is living. If the annuitant dies before the end of the guaranteed period, payments continue to a named beneficiary until the end of the guaranteed period and then cease.

Lump Sum Payment

The entire payment of an annuity policy to the annuitant at one time, rather than installment payments.


Market Value Adjustment (MVA)

Applied during the Surrender Period. Triggered when you withdraw too much money during surrender period. Account value is adjustment downward if interest rates have risen since you bought your annuity. Upward if rates have declined.


New Money Rate/ Renewal Rate

The interest rate that applies to the portion of the insured’s account balance that is no longer in the new money period as defined in the insurance contract.

Non- Qualified Funds

Funds are designated as non- qualified if they have already been taxed (post- tax dollars) except Roth IRA funds.


Participation Rate

For an indexed annuity the participation rate is the amount of an index’s gain that will be credited to the policy value.


The amount paid to the insurance company to purchase the annuity. Paid as a lump sum or as installments.


The total amount of premium paid to an annuity.


Qualified Funds

Annuity funds are designated as qualified if they have not yet been taxed (pre- tax dollars), except Roth IRA funds


Required Minimum Distribution (RMD)

A required minimum distribution (RMD) is the minimum amount of money an annuitant must receive per year from a qualified account (for example, an Individual Retirement Account) beginning by April 1st of the year following the year they attain the required beginning age established by federal tax law. The contract owner must continue to take out the calculated RMD amount by December 31st of each calendar year thereafter. Historically, federal tax law has set the required beginning age for RMDs at age 70 ½. However, recently enacted federal legislation increases the required beginning age for those born on or after July 1, 1949, to age 72. If you were born before July 1, 1949, your required beginning age for taking RMDs remains age 70 ½.


Rider is another name for an addition to a base policy contract that adds further benefits or agreements to an insurance policy.


Settlement Options

A settlement option is a provision in an annuity policy that, when exercised, provides for optional methods of settlement in place of a lump- sum cash payment. These are usually in the form of a stream of periodic payments, made for a fixed amount of years or made during the lifetime of the annuitant.

Single Premium

An annuity purchased with one lump sum payment. The payout can be either immediate or deferred.

Surrender Charge

A surrender charge can mean an amount charged to an annuity contract owner when they prematurely withdraw a portion or the entire contract’s accumulated value

Surrender Value

The surrender value is the amount in cash a contract owner is entitled to collect upon terminating the annuity contract prior to maturity or death.


Tax- Deferred

Interest credited to an annuity that is not taxed as earned income until it is withdrawn.

Tax Sheltered Annuity (TSA)

A tax sheltered annuity (TSA) is an annuity issued by an insurance company under Section 403 (b) of the Internal Revenue Code designed to help the annuitant accumulate funds for retirement. Eligibility is limited to specific occupations such as teachers and people who work for non-profit organizations.



The percentage return on an investment.