Section 2/E. Types of Life Insurance Policies

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Annuity

A contract that provides income for a specified period of years, or for life

Owner

This is the purchaser of the annuity contract, but not necessarily th eone who receives the benefits. This person has all of the rights, such as naming the beneficiary and surrendering the annuity. This may be a corporation, trust, or other legal entity.

Annuitant

This person who receives the benefits or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written. Although a corp, trust, or legal entity may own the Annuity, this person must be a natural person.

Beneficiary

This person receives annuity assets (either the amount paid into the annuity or the cash value, whichever is greater) if the annuitant dies during the accumulation period, or to whom the balance of annuity benefits is paid out.

accumulation period

(pay-in-period) this is the period of time over which the owner makes payments (premiums) into an annuity. Also, it is the period of time during which the payments earn interst on a tax-deferred basis.

Annuity period

(annuitization period, liquidation period, or pay-out period) this is the period of time which the sum that accumulated during the accumulation period is converted into a stream of income payments to the annuitant.

1. Amt. of fpremium paid or cash value accumulated; 2. Freq of the payment; 3. Interest Rate; and 4. Annuitant's age and gender

The annuity income amount is based upon what 4 elements?

Liquidating a Principal sum

The basic function of an annuity is what?

1. Premium payment method: single premium vs. Periodic; 2. When income payments begin: immediate vs. deferred; 3. How premiums are invested: fixed vs. variable; and 4. Disposing of proceeds: pure life, annuity certain, or life refund annuity

What are the 4 classifications off annuity?

immediate annuity

purchased with a single premium and provides income payments that start within one year

deferred annuity

annuity in which income payments begin sometime after one year

accumulation units

similar to buying shares in a Mutual Fund, variable premiums purchase these and represent ownership interest in teh separate account

Indexed Annuities

these are fixed annuities that invest on a relatively aggressive basis to aim for higher returns. It has a guaranteed interest rate. The current interest rate is tied to a familiar index like the S&P 500