Annuities Jargon

Annual Rider Charge Rate: an optional instrument used to tie-in specific guarantees ie: Death Benefit, Partial Withdrawals, Return of Premium, etc. (does not have to occur annually)

Allocation: the percentage of your premium that is invested (usually 100%)

Rate: the interest percentage as stated in the contract (can be changed annually by the insurance company if the contract allow it)

Minimum Guaranteed Rate: the interest obligated percentage (if any) will never become lower than this guarantee.

Participation Rate: regulates how much of the index’s increase (if any) will be used to compute the index-linked interest rate ie: suppose the participation rate is 70% and the index increases 8%, then the return credited to your annuity would be 5.6% (8% x 70% = 5.6%).

Minimum Guaranteed Participation Rate: the participation rate will never become lower than this agreed upon percentage ie: 50% or 10% or etc.

Annual Spread: a preset deduction from the percentage of an index’s growth or the difference between what is promised to the annuitant and what the insurance company can earn.

Maximum Guaranteed Annual Spread: the insurance company earning on your annuity will never rise upon this percentage ie: 10%, 8%, 6%, etc.

Market Value Adjustment: if interest rates are higher than the contract rate, then any surrendered value will be decreased (and vice versa)

Surrender Charge Rate: if the contract is surrendered or partial withdrawals exceed the agreed upon amount then this charge would be applicable.

Premium Bonus: 5%, 10%, or as agreed upon percentage that is added to the annuitant’s premium.