Annuity Definitions

Find helpful definitions for annuity contract and insurance terms to help with financial and retirement planning.

Annuitization- Conversion of the Surrender Value of the annuity into regular guaranteed income payments.

Annuity- A contract with an insurance company designed to accumulate premiums plus interest prior to maturity, then distribute the proceeds through a series of regular payments.

Beneficiary- The person named to receive the death benefits of an annuity contract or a life insurance policy.

Contract Value- The total of the value in the annuity contract.

Death Benefit- The greater of the Contract Value or Minimum Guaranteed Surrender Value (MGSV) of the annuity is paid in a lump sum with no Surrender Charges to named beneficiaries.

Free Withdrawal- Opportunity each year, after the first contract year, to take withdrawals up to a predetermined percentage of the Contract Value, without expense.

Joint Life Payout- A joint life payout is available only to legal spouses, as defined under federal law. Both spouses must be at least 50 years of age and payment is based on the age of the younger joint payee. Payments are made through the life of the last surviving spouse, so long as spousal continuation is elected.

Nonqualified Annuity- Annuity premiums that are paid with after-tax dollars.

Partial Withdrawal- Available at any time, for partial distribution over the Free Withdrawal amount. Surrender Charges and minimum values will apply.

Premium- A lump-sum or series of payments made into an annuity.

Qualified Annuity- An annuity that is funded with pre-tax contributions.

Rider- A benefit added that becomes part of the contract and may expand or limit contract provisions or the benefits payable.

Single Life Payout- For the owner and sole annuitant, payouts are based on sex and age at election.

Surrender- Termination of the contract in exchange for Surrender Value.

Surrender Charge- An amount subtracted from the Contract Value if surrendered at a time when the Surrender Charges apply.

Surrender Value- The amount paid to the contract owner when the contract is surrendered.

Tax-Deferral- The deferral of state and /or federal income taxes owed until a later date.