Overview of Products
Annuities
An annuity is a contract issued by an insurance company and generally composed of two stages: the accumulation period, during which the contract builds a cash value and money is added, and the payout period, when the funds are distributed. Annuities offer tax deferral during the accumulation phase, flexible payment options, and guaranteed death benefits.
Fixed Annuities
Fixed annuities offer a guarantee of principal and interest. Contributions earn a stated interest rate for a specified period of time while earnings grow tax deferred. Fixed annuities are for conservative investors.
Variable Annuities
Variable annuities offer single or flexible premiums, a broad range of subaccounts, tax deferral on earnings, and a death benefit. Values change according to the performance of the selected subaccounts. Generally, variable annuities have higher expenses than a fixed annuity. Variable annuities are long term investments designed for retirement purposes and are best suited for investors willing to tolerate risk.
Market Value Adjusted Annuities (MVAs)
MVAs offer fixed interest rates combined with an interest rate adjustment factor that can cause the actual crediting rates to increase or decrease in response to current market conditions at the time of withdrawal. MVAs are appropriate for individuals who are willing to tolerate minimal risk for a higher initial credited interest rate.
Equity Indexed Annuities
Equity indexed annuities present interest based on the upward movement of an equity index, but still maintain the minimum guaranteed interest rate feature of a traditional fixed annuity. Equity indexed annuities are for individuals who are moderate risk takers — they want the guarantees of a fixed annuity while their earnings benefit on possible market upswings.
Equity Linked Annuities
Equity linked annuity performance is based on the upward or downward movement of an equity index. Growth and loss are subject to maximum limits that vary according to the investment options chosen. An individual's risk tolerance will impact the potential for growth—investment options with the highest protection against loss will also receive the lowest potential for growth. It is important to understand that even with downside protection, the investor may lose the money invested in the contract. Equity linked annuities may be appropriate for individuals who are willing to tolerate a level of loss in return for a higher potential for growth, i.e., customers with a moderate to aggressive risk tolerance.
Immediate Annuities
Immediate annuities have no accumulation phase. It is purchased with a lump sum payment and income payments are started right away. Immediate annuities are suitable for individuals who recently received a lump sum of money and are in need of a steady stream of income.
Life Insurance
Although there are many uses for life insurance, its traditional function remains the same. Life insurance protects individuals during the loss of a loved one and helps provide a sense of security for their future. That is why having a thorough understanding of life insurance is important in providing your customer and their families with optimum protection and peace of mind.
Term Life Insurance
Provides coverage for a specified period of time, usually 10, 15, 20, 25, or 30 years. Once the period for the policy runs out, the life insurance coverage expires. Some policies can be automatically renewed at the end of the coverage period, and some can be converted to permanent insurance without the need for a medical exam.
Universal Life Insurance
Offers flexible premium options and a death benefit. Allows changes to the death benefit, the amount of premium, and payment frequency. Most policies pay a minimum guaranteed interest rate.
Variable Life
Contains death benefits and cash values that vary with the performance of underlying subaccounts. The death benefit and cash value are not guaranteed and can fluctuate according to the current market. Most policies offer a guaranteed minimum death benefit for protection against poor markets.
Variable Universal Life
Combines the flexible premium and death benefit options of universal life with the investment flexibility and risk of variable life. Most policies offer a guaranteed minimum death benefit.
Whole Life Insurance
Provides a fixed guaranteed rate and builds guaranteed cash values. There are two variations of traditional whole life:
Joint Whole Life (Also known as first-to-die): Insures two lives and pays the death benefit to the surviving insured person when the first one dies.
Survivorship Life Insurance (Also known as second-to-die): Insures two people and pays a death benefit only when the second person has died. It is designed for married couples who want to provide funds to pay estate taxes that may be due after their deaths.
These definitions are for general educational use only. They should not be deemed legal, tax, or other financial advice.
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