Suitability

FAQ

Glossary

GLOSSARY OF ANNUITY TERMS

Account Value – The Account Value is the sum of all Premiums, increased by accumulated interest or Index Credits, less the amount of any gross withdrawals. The Account Value is not necessarily the same as the Surrender Value.

Accumulation Phase – The time period when an Annuity earns and accumulates interest. This time period runs from the date of purchase to the time when the annuity matures, is surrendered or enters the Payout Phase.

Accumulation Product – A financial product designed to build wealth over a long period of time. Value "accumulates" in the product in order to be used at a later date, as for retirement.

Annuitant – The person or persons on whose life or lives the Annuity is based, primarily for the purpose of Annuitization. The Contract Owner decides who the Annuitant will be. The Contract Owner and Annuitant are often the same person.

Annuitize – The transaction that changes a Deferred Annuity from the Accumulation Phase to the Payout Phase.

Annuity – A contract sold by an insurance company to provide payments to the holder at specified intervals, usually after retirement. Annuities have two phases: Accumulation and Payout.

Beneficiary – The recipient of an Annuity's value on the death of the Contract Owner.

Caps – In a Fixed Index Annuity, the maximum percentage of Index Credits the Annuity can earn.

Cash Value – The amount of money to be received by the Contract Owner if an Annuity is Surrendered. It is usually the Account Value minus Surrender Charges.

Contract Owner – The person or entity who purchases the Annuity and has rights to the contract. This person names the Annuitant and the Beneficiary, and may exercise the provisions of the Annuity contract.

Cost Basis – Actual Premium or Principal paid to a Non-Qualified Annuity is referred to as the "Cost Basis" of the Annuity contract. Since it is money that has already been subject to Income Tax, it will not be taxed upon withdrawal.

Death Benefit – The payment made to the Beneficiary upon the death of the Owner as described in the contract.

Deferred Annuity – A type of Annuity that defers payments of income or a lump sum until maturity or until the Contract Owner elects to receive them.

Distribution Phase – The contractually established period during which annuities distribute Principal and Accumulated Interest to the Contract Owner. Also called the Payout Phase or Income Phase.

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Equity Index Annuity – An Annuity whose earnings are tied to the performance of a market index or indexes (e.g., the Standard & Poors 500®). Equity Index Annuities are a type of Index Annuity or Fixed Index Annuity.

Fixed Annuity – An investment vehicle offered by an insurance company that includes a minimum guaranteed interest rate and account value.

Fixed Index Annuity (FIA) – An Annuity whose earnings are tied to the performance of a market index or indexes (e.g., the Standard & Poors 500®). Fixed Index Annuities are intended for the accumulation phase of retirement savings. The term "FIA" is sometimes used interchangeably with "Equity Index Annuity," but that's not always accurate since FIAs may be tied to indexes other than stock market indexes. Also known as an Index Annuity.

Flexible Premium Annuity – An annuity that accepts multiple payments of Premium.

Free-Look Period – The period of time after an Annuity contract is delivered when the Contract Owner may cancel the policy without penalty. The specifics of the free-look period are set by state regulation.

Free Withdrawal – A withdrawal that is permitted from an Annuity without a Surrender Charge or Market Value Adjustment, if applicable.

Guarantee Period – The period of time during which interest rates are guaranteed by the insurance company. For Fixed Index Annuities, the Guarantee Period may also apply to the Participation Rate, Caps or Spreads.

Highest Anniversary Mark – In a Fixed Index Annuity, a crediting method that awards Index Credits based on the difference between the beginning index level and the highest anniversary level reached during the Index Period.

Immediate Annuity – An Annuity that begins regularly scheduled payouts within one year of purchase. In most cases, payments begin 30 days after the Annuity contract is issued.

Income Phase – The contractually established period during which Annuities distribute Principal and accumulated interest to the contract owner. Also called the Payout Phase or Distribution Phase.

Index Credits – Index Credits are earnings calculated based on the performance of market indexes, such as the Standard & Poors 500®. Index Credits are comparable to interest, but are called Index Credits in order to clarify that they're calculated based on the performance of a market index, rather than a fixed rate of return.

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Index Period – In a Fixed Index Annuity, the period of time during which the change in the applicable index or indexes is measured, for the purpose of calculating Index Credits.

Market Value Adjustment (MVA) – An adjustment (positive or negative) that is applied when an account is liquidated early. It is designed to share some of the investment risk associated with the annuity between the contract holder and the company.

The way an MVA works is simple. If you make an early liquidation of an annuity that has an MVA, you may have a higher or lower value at the time money is withdrawn.  Generally, if  interest rates in the market are higher than when you purchased your annuity, the adjustment may cause your value to be lower. Similarly, if interest rates in the market are lower than when you invested in your annuity, the value may be higher than it would be without the MVA. 

Multi-Year Guarantee Annuity (MYGA) – An Accumulation Phase Annuity which guarantees an interest rate for the full contract period.

Non-Qualified Annuity – An Annuity purchased with after-tax dollars that is not part of a tax-qualified retirement plan. Money paid into a Non-Qualified Annuity is not tax deductible.

Non-Surrenderable Annuity – An Annuity, the terms of which prohibit Surrender before the Guarantee Period ends.

Partial Surrender – Withdrawing part of the value of an Annuity. 

Participation Rate – In a Fixed Index Annuity (FIA), the percentage of the increase in the applicable index, during the Index Period, that will be credited as interest to the Annuity. For example, an FIA with a participation rate of 80%, during an index period when the index rose 10%, would credit 8% interest (80% of 10%).

Payout Phase – The contractually established period during which Annuities distribute Principal and accumulated interest to the Contract Owner or their named payee. Also called Distribution Phase or Income Phase.

Penalty-Free Withdrawal – A withdrawal that is permitted from an Annuity without the penalty of a Surrender Charge.

Point-to-Point – In a Fixed Index Annuity, a crediting method that awards Index Credits based on the difference between the beginning index level and the index level at the end of the Index Period.

Premium – Money paid into an Annuity. For purposes of simplicity, people sometimes talk about "deposits" into an Annuity.

Principal – The sum total of all actual Premiums put into a Non-Qualified Annuity. Equal to Cost Basis.

Qualified Annuity – An Annuity usually purchased with pre-tax dollars as part of a tax-qualified retirement plan, such as an IRA.

Renewal Interest Rate – The interest rate that will be credited after the initial Guarantee Period.

Rider – A contract provision which changes the policy's features or rules. Standard Life of Indiana's Total Command series of annuities uses riders to add features.

Single Premium Annuity – An Annuity that accepts either a single payment or a number of payments over a very short period of time.

Split Annuity – A Split Annuity is a combination of two separate Annuity contracts, one Immediate and one Deferred. The Immediate Annuity provides tax-advantaged income while the Deferred builds value.

Spreads – In a Fixed Index Annuity, a specific percentage subtracted from the calculated return during the Index Period.

Surrender – Withdrawing the entire value of an Annuity Contract in a single payment.

Surrender Charge – A penalty that reduces the Account Value when funds are removed from the Annuity during the Surrender Charge Period.

Surrender Charge Period – The period during which Surrender Charges will be subtracted from an Annuity's Account Value if funds are withdrawn from the Annuity.

Tax-Deferral – The ability to delay paying Income Tax on earnings until those funds are withdrawn from the Annuity.

Variable Annuity – A type of annuity in which the Account Value will fluctuate with the performance of the underlying funds, investment decisions are made by the Contract Owner and loss of Principal is a risk.

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