1035 Exchange: This is known as a tax-free exchange since the policyholder does not pay any taxes. The exchange can be between two different products or insurance companies. It is only tax free if the policyholder does not see any of the money, they cannot be the middleman.

A

AIR: Assumed interest rate or return

Accumulation Period: When the employer and/or participants putting money in the annuity.

Annuitant: The person named by the contract owner as the annuitant. It has to be one person, not a living trust, corporation or partnership. The annuitant has no say in the contract, cannot make withdrawals, change names or terminate the contract. The annuitant is similar to the insured of a life insurance policy.

Annuitization: Is when the policyholder chooses to contract for a series of payments. It provides an even distribution of both principal and interest over a period of time. Annuitization only subjects a portion of the amount withdrawn for that year to be taxed.

B

Bailout Option: this allows the policyholder to withdraw their money without penalty charges if the interest rate on their annuity falls below the initial rate of the contract.

Banding Method: uses a year-by-year means of crediting annuity accounts. Employee contributions are banded together for that particular year.

Beneficiary: the person waiting for the annuitant to die, this is the only way they can prosper. The beneficiary, like the annuitant, has no say or control in the management of the policy. Though, the policy can name trusts, corporations, trusts or partnerships as beneficiaries.

BIF: Bank Insurance Fund

C

Contract Fee: This charge is a flat dollar amount charged which can be charged at issue or annually.

CFP: Certified Financial Planner

ChFC: Chartered Financial Consultant

Compound Interest: simply speaking, interest is earning interest. It is the reinvested amount, principal plus interest, that is put back into the annuity.

Contract Owner: the policyowner.

D

DCA: Dollar-cost average is principle where several purchases of a variable annuity are made over an extended period of time. The predictable highs and lows average out.

Deferred Annuity: is used to accumulate funds. It is normally done by investing one lump sum. The policyholder can choose to take out interest, or let is compound.

E

Exclusion Ratio: upon annuitization, an exclusion ratio is automatically determined. Only the amount considered growth and/or interest is fully taxed, no the already taxed principal. The exclusion ratio varies depending on the life expectancy of the annuitant, based on mortality tables or the set number of years the contract owner chooses.

Explicit Fees: These charges are clearly indicated. They may be applied regularly throughout the year, such as when the account is valued, when a contribution is received, a loan is made or a withdrawal occurs.

F

FDIC: Federal Deposit Insurance Corporation

Fixed Rate: the interest rate is set, it does not change from day today.

G

Guaranteed Death Benefit: The guarantee is that upon death of the annuitant, the beneficiary will receive the greater principal, plus any additions, or the value of the account as the annuitant's date of death.

I

Immediate Annuity: the policyholder begins receiving checks out immediately.

Implicit Fees: These charges are made indirectly and can be much higher than the explicitly fees.

Insurer: the insurance company.

IPO: Initial public offering

IRA: Individual Retirement Account

IRC: Internal Revenue Code

M

Market value Adjustment: This provision adjusts the accumulated fund balance upward or downward. The adjustment is in the opposite direction of the movement in the interest rates.

MEA: Maximum exclusion allowance.

N

No Load/Commission Free: This means that the commission is paid from the insurance company, not out of the policyholder's principal. This charge, also called Percentage of Premium Charge, is deducted from each premium paid. The percentage may reduce after the contract has been in force for a certain number of years or after the premiums paid in have reached a certain level.

P

Pass-through Insurance:

Payout Period: this is the length of time the policyholder wants payments from the annuity. The policyholder can choose any length of time as long as the annuity principal is there to cover the request.

Portfolio Average: This method reflects the insurer's earnings on its entire portfolio during a given year. All policyowners are credited with a single composite rate.

Principal: Initial amount invested into the product.

Prospectus: This defines the different types of subaccounts within the variable annuity, charts the previous performance of these investments, and lists any and all charges that will be deducted from the variable annuity portfolio.

R

RAM: Reverse Annuity Mortgage

Reinsurance Network: This was designed to protect the insurance companies so that if there was a large run on the money in the insurance industry, no one company would be required to take the brunt of the loss. This spreads the risk out among all of the insurance companies offering similar products.

S

SAIF: Savings Association Insurance Fund

SEC: Securities Exchange Commission

SEP: Simplified employee pension plan

SPWL: Single Premium Whole Life

SPDA: Single Premium Deferred Annuity

Surrender Charge: The surrender charge varies from company to company and contract to contract. The penalty only applies if the policyholder takes out a certain amount of money from the contract above the policy limits within a set number of years.

SWP: Systematic withdrawal plan allows the investor to have a check for specified amount sent to whom ever they wish monthly or quarterly.

T

TEFRA: The Tax Equity and Fiscal Responsibility Act of 1982

TSA: Tax-sheltered annuities, which can also be referred to as tax-deferred annuities. This type of annuity is considered a qualified plan.

V

Variable rate: the interest is variable, each day it may change.

Vesting: is when an employee benefit plan participant's has the rights of ownership to the employers contributions made on their behalf, plus earnings on those contributions. The employee is put in control.

Thank you for ordering from:

United Insurance Educators, Inc.

PO Box 1030

Eatonville, WA 98328

(800) 735-1155