Jargon Translator
The insurance and financial services industry is filled with jargon, lingo and acronyms. While these terms mean a lot to the people who work with them, they mean little to everyone else. And while we try real hard not to use them, sometimes they sneak out.
So, we’ve put this list together. If you happen to come across a bit of jargon or lingo this should help you figure out what we were trying to say.
Actuary – This is a mathematician who calculates premiums, reserves, dividends, insurance, pension and annuity rates for insurance companies.
Annuitant – This is the person whose life is insured. The annuitant and the annuity owner don’t have to be the same person.
Annuitization – The time you spend contributing to your annuity is the accumulation phase. The “annuitization” phase begins when you start receiving money from your annuity.
Annuity – This is an insurance contract issued by a life insurance company. It provides income at regular intervals for a defined period of time, such as a specific number of years or for life.
Asset Allocation – Means spreading your investments between the three asset categories (stocks, bonds, cash) to help minimize risk.
Contract issue date – This is the date you signed the paperwork to buy an annuity.
Contingent Deferred Sales Charge (CDSC) – This is the fee collected by the investment company if you take money from your investment early in the contract. It typically goes down over time and goes away altogether when you reach to defined period for the contract. This charge compensates the company for the high cost of setting up your account.
Deferred annuity – This annuity is used to grow your assets and provide a steady stream of income during retirement. After you purchase the annuity, you deposit money into it over a period of time and that money is invested. At a certain point, usually at retirement, you start receiving payments from the annuity, either in a lump sum or in installments.
Fixed annuity – If you buy a fixed annuity, your annuity payments are guaranteed to be the same amount every time.
IRAs – Individual retirement accounts are accounts that you own and contribute to. The three basic types of IRAs are:
- traditional IRAs - Earnings in a traditional IRA are tax-deferred. This means that you don’t owe taxes until the funds are withdrawn – usually at retirement.
- Roth IRAs – Earnings in a Roth IRA are tax-deferred so you aren’t taxed as the fund accumulates.
- education IRAs
Immediate annuity – Win the lotto, inherit a large sum of money or sell a business? You can use an immediate annuity to convert a lump sum into payments for life or for a certain number of years. Payments begin immediately.
Qualified/nonqualified – This is just a fancy way to say pre-tax or post-tax. Qualified contributions come from money that hasn’t been taxed yet – like money withheld from your paycheck for your 401k. Nonqualified contributions come from money that has already been taxed – like the check you write for your IRA.
Rider – This is an extra option that you can add to some annuities at an additional cost. Riders add features to your investment products so they fit your personal situation.
Single premium/single purchase payment – A single premium annuity is a deferred annuity that lets you put money into your annuity account only once, when you first purchase the product.
Variable annuity – This is a long-term investment product that provides a variable rate of return based on the performance of the investments that you select.
