Cheat shet 2 - Advantages of annuities: Tax exempt, aging...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Advantages of annuities: Tax exempt, aging population, lacking government trust. 457 is for government employees and 403 b is for educators. 457 403b IRA contribution are tax deductible and interest accumulates on tax deffered bases. and roth IRA withdrals after age 59 fre of income tax as long as the account was open for 5 years. Whole life1Flexible-premium deferred annuity permits the contract owner to pay premiums at whatever time and in whatever amount he or she wishes, subject to insurer minimums. Interest credited on the cash values of personally owned annuities is not taxable to the contract owner as long as it remains on depost with the insurance company. On liquidation annuity payments are taxable, as ordinary income to the extent that each payment represents previously untaxed income. 2 Single premium deferred annuity a minimum stated reate of interest is guaranteed for the duration of the contract, but most insurers credit competitive market rates. The single premium is often reduced by indentifiable front end load. They have a bailout provision that say if interest rates go lower they owner can get out without any surrender charge but could have interest on it. 3.Single premium immediate annuity provides that payments. To the annuitant commence immediately after the insurer has a single premium payment. For those who have large sums of money. 4. Structured settlement annuity is an SPIA contract issued by a life insurer whereby the insured party receives periodic payments from the defendant in a personal insury lawsuit. It involves attorneys and a structured settlement specialist, the periodic payment are are funded through an SSA purchased by the defendant or the liability insurer from a life insurer that gaurntees to make the agreed upon payments usually for the life of injured person. Cash refund pays lum sum amount to the beneficiary the difference between the purchase price of the annuity and the sume of the installments payments made prior to the annuitants death. While installment refund is if the annuitant dies before receiving the income installments equial to the purchase price the payment will be continued to beneficiary. Definitions: Contract of Adhesion Valued Policy vs. Indemnity Policy Conditional Unilateral Adhesion contract meaning that its terms and provision are fixed by one party the insurer and with minor exemptions must be accepted or rejected en total by the other party policy holder. Valued is when the policy owner pays regardless of economic condition. Indemnity contract insured suffereing a covered loss are entitled to recover an amount not greater than that which would be necessary to place the insured in the same preloss financial position. Condition contract is when the insurers obligation to pay a claim depends upon the performance of certain acts such as payments of premiums and furnishing proof death. Insurer is protected from moral hazard. UNITILATERAL means that only one party the insurer gives legally
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/16/2012 for the course FINA 442 taught by Professor Ms.etheridge during the Fall '11 term at South Carolina.

Page1 / 2

Cheat shet 2 - Advantages of annuities: Tax exempt, aging...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online