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Annuities > Glossary

Accumulation phase. The phase during which you pay money into your annuity. You can contribute a lump sum or make multiple payments over time.

Annuitization phase. The phase in which you receive monthly payments from your annuity.

Basis points. The fees in your annuity. The number of basis points reflects a percentage of your investment. For example, 200 basis points would be 2 percent of your investment.

Death benefit. The amount of money your beneficiary receives if you die before you begin the annuitization phase. It is generally the value of your annuity or the amount you have invested, whichever sum is greater.

Mortality and expense (M&E).The fee the insurance company charges you to provide you with a lifetime income, and your beneficiaries with a death benefit should you die during the accumulation phase.

Non-qualified annuity. An annuity that is funded with after-tax dollars.

Qualified annuity. An annuity that is funded with pre-tax dollars.

Rider. A feature on your annuity that provides an additional benefit. For example, a long term care rider would cover nursing home costs. A bonus rider would give you an extra 1 to 5 percent of your investment upon buying the annuity.

Surrender. The act of getting out of your annuity. There is usually a fee if you surrender your annuity within the first seven or eight years of owning it. This fee is also known as a contingent deferred sales charge (CDSC) or a back-end sales load.

Tax deferral. The money that accumulates in your annuity grows tax-deferred, meaning you do not pay taxes on it until you begin receiving annuity payments. The death benefit on your annuity is also taxable to your beneficiary.

Term certain annuity. An annuity that provides you with income payments for a specific period of time, such as 10 or 20 years, rather than a lifetime.  

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