Annuities glossary and key definitions
We know annuities can be complicated, which is why we’re here to simplify the financial terms and acronyms associated with them.
These glossary terms are provided to help you better understand your annuity statement. If any definition here differs from the one in your annuity contract or related documents, the definition in the contract will control.
Account option
Any investment option available with your annuity contract, including an indexed account and the fixed account, if applicable.
Accumulation phase
The period of time, before lifetime income payments begin, when your benefit base can grow in value.
Annuitant
The person, designated by the contract owner, whose life expectancy determines the annuity payments. In an annuitant-driven contract, the annuitant’s death typically triggers the payout or termination of the annuity.
Annuitization
The optional payout phase during which regular payments are received from your annuity. There is no additional cost for annuitization, but it is irrevocable once payments begin.
Annuity
A contract issued by an insurance company which can help you to accumulate assets and generate income for retirement.
Balanced allocation value (BAV)
Tracks daily changes in the selected strategy options and equals the higher of: the contract value plus any strategy earnings not yet added to the contract or the Return of Purchase Payment Guarantee amount. The BAV is used to calculate both the death benefit and the lifetime income benefit base.
Beneficially owned contract (inherited)
An annuity contract set up to pay the remaining value of the original contract after the owner dies. It ensures that the beneficiary receives the funds in a way that complies with required minimum distribution (RMD) rules established by the Internal Revenue Service (IRS). There are 2 main types of beneficially owned contracts: a continued beneficially owned contract where the original contract continues to facilitate payments to the beneficiary and a purchased beneficially owned contract where the proceeds from the original contract are used to purchase a new annuity contract to facilitate payments to the beneficiary.
Beneficiary
The recipient designated to receive certain benefits under the contract, which could include any death benefit that becomes payable. A beneficiary can be a person, trust, charity, etc., as chosen by the annuitant/owner.
Beneficiary (contingent)
The backup recipient who receives benefits only if all primary beneficiaries are deceased or otherwise unable to claim them.
Beneficiary (minor)
State law limits the policy proceeds amount Nationwide can pay to a minor beneficiary in their individual capacity. If the policy proceeds amount exceeds state law limits, Nationwide can pay the proceeds only to a court-appointed guardian/conservator of the minor’s estate. Please contact your legal advisor for options when naming a minor beneficiary to avoid court intervention.
Beneficiary (primary)
The recipient first in line to receive benefits under the contract.
Beneficiary designation “per capita”
If beneficiaries are designated to receive their share of annuity contract proceeds “per capita,” then upon the death of a named beneficiary, the benefits due to that beneficiary will be divided equally among the remaining named beneficiaries.
Beneficiary designation “per stirpes”
If beneficiaries are designated to receive their share of annuity contract proceeds “per stirpes,” then upon the death of the named beneficiary, the benefits under the contract will pass directly to that beneficiary’s descendants (e.g., children).
Buffer
A built-in protection feature that absorbs a portion of losses, up to a specified percentage, when calculating the gain/loss for an index strategy on the term-end date.
Cap (also known as “cap rate” and “index cap rate”)
The maximum amount of gain permitted when calculating the gain/loss for an index strategy on the term-end date. Cap rates may change from one strategy term to the next.
Carryforward (also known as “income carryforward”)
With certain living benefit riders, you can delay some of your income payment until the following year. The income carryforward amount is noncumulative and therefore will be forfeited if not withdrawn in the next calendar year.
Charges
Amounts deducted from your contract value to cover costs of the annuity contract and any elected riders.
Contingent annuitant
The person, designated by the contract owner, who will become the annuitant if the annuitant dies prior to the annuitization date (income phase).
Contingent beneficiary
The backup recipient who receives benefits only if all primary beneficiaries are deceased or otherwise unable to claim them.
Contingent deferred sales charge (CDSC) (also known as “surrender charge”)
A charge that may be assessed on any withdrawals or full surrenders prior to the end of the CDSC/surrender charge period. This charge is intended to cover expenses incurred in connection with the sale of the annuity contract.
Contingent owner
If there is no joint owner, the person (designated by the contract owner) who will become the owner of the annuity contract if the contract owner passes away prior to annuitization.
Contract accumulation value (CAV)
The sum of the strategy accumulation values for each strategy.
Contract owner
The person or entity who has all the rights under the annuity contract, unless there is a joint owner. In an owner-driven contract, the owner’s death typically triggers the payout or termination of the annuity.
Contract value
The amount of money in the annuity contract. Contract value can be calculated using multiple formulas, depending on the type of annuity contract. Refer to your contract for details about how contract value is calculated for your specific annuity.
Covered life
The life or lives upon which lifetime income benefits are determined. The covered life is typically the contract owner, but may also be the annuitant if the contract has a non-natural owner.
Daily accumulation value (DAV)
Tracks daily changes in the selected strategy options and equals the higher of: the value of all strategy options plus any strategy earnings not yet credited to the strategy or the return of purchase payment guarantee amount. The DAV is used to calculate free withdrawals, the death benefit and the lifetime income benefit base.
Death benefit
A payment made to the beneficiary(ies) when the annuitant, or co-annuitant (if applicable), passes away before annuitization, while the contract is in force, and there is no contingent annuitant. The death benefit value can be calculated using multiple formulas, depending on the contract or elected death benefit rider. Refer to your contract and any applicable riders for details about how the death benefit value is calculated for your specific annuity.
Declared rate
An interest rate declared by Nationwide that will be used to calculate interest applicable to the declared rate allocation.
Declared rate allocation
A percentage that represents the proportion of the strategy option that is multiplied by the declared rate.
Deposit(s)
Money you put into your annuity.
Determining life
The life or lives upon which lifetime income benefits are determined. The determining life is typically the contract owner, but may also be the annuitant if the contract has a non-natural owner.
Fixed account
An option that allows you to earn a guaranteed interest rate for a specified period.
Fixed account earnings/interest
The interest earned on the portion of the annuity’s contract value that is allocated to the fixed account.
Fixed account rate
The guaranteed interest rate credited to the fixed account.
Fixed strategy
An option that allows you to allocate a portion of your indexed annuity contract value to a strategy which earns a guaranteed interest rate during a strategy term.
Fixed strategy interest rate (also known as “fixed strategy rate”)
The annualized interest rate (credited daily to an indexed annuity’s contract value) allocated to the fixed strategy during a strategy term.
Fixed strategy value
The daily value of the fixed strategy, which is calculated each business day and is equal to the amount allocated to the fixed strategy plus any interest credited.
Fund exchange
Moving money between your contract’s underlying investment options (or subaccounts) and a fixed account, if applicable.
Fund unit (units owned)
An accounting unit of measure used to calculate the value allocated to each underlying investment option (or subaccount). The value is calculated by multiplying the net asset value of the subaccount by the number of units owned.
Guaranteed living withdrawal benefit (GLWB)
A feature you can add to certain annuities that ensures that you receive a steady stream of income for life.
Highest contract anniversary
The highest value an annuity contract reaches on any contract anniversary date.
Income benefit base
The numerical value multiplied by the applicable lifetime withdrawal percentage used to determine certain values under your contract, including, but not limited to, your lifetime withdrawal amount.
Income phase
The period of time after lifetime income payments begin. The income phase ends on the earlier of the annuity commencement date or rider termination.
Index
A market index associated with an index strategy. The performance of the index is used to calculate interest credited, if any, to your annuity.
Index account earnings (also known as “index strategy earnings” and “strategy earnings”)
The interest credited (which can be positive or equal to $0) at term-end to the annuity based on the performance of your chosen index.
Index allocation
The percentage of the strategy option that is associated with the performance of your chosen market index.
Index cap rate (also known as “cap” and “cap rate”)
The maximum amount of gain permitted when calculating the gain/loss for an index strategy on the term-end date. Cap rates may change from one strategy term to the next.
Index lock-in
A feature, available to you once per strategy term for each elected strategy option, which locks in the strategy's index value. The lock-in value will be used to calculate earnings at the end of the strategy term. The lock-in value will also be used when a withdrawal is taken or if a death benefit becomes payable before the end of a strategy term.
Index strategy
An investment option available with your annuity contract that is linked to the performance of a market index.
Index strategy basis
The value of any elected index strategy on the first day of a strategy term.
Index strategy earnings (also known as “index account earnings” and “strategy earnings”)
The interest credited (which can be positive, negative or equal to $0) at term end to the annuity, based on the performance of your chosen index.
Index strategy value (also known as “strategy value”)
The value of an index strategy calculated at the end of each business day. The index strategy value is equal to the index strategy basis plus index strategy earnings (which may be positive, negative, or equal to $0). The index strategy value is the amount used when processing a withdrawal or full surrender, a death benefit payment, a transfer among strategies, the calculation of any applicable charge, or an annuitization request.
Index value
The closing value of an index as disclosed by the market index provider.
Indexed account
An investment option available with your annuity contract that is linked to the performance of a market index.
Investment options (also known as “underlying investment options,” “sub-accounts,” “funds”)
Specific variable investment options available within your annuity. The portion of your annuity contract value allocated to one or more investment options are subject to market exposure.
Investment results
The increase or decrease in value of an investment option over a period of time (daily/quarterly/yearly/since the annuity was purchased). May also be referred to as net investment results.
Joint owner
The person, designated by the contract owner, who has an undivided interest in the annuity contract. When there is a joint owner, action from both the owner and the joint owner is required to exercise their rights under the annuity contract.
Living benefit
A benefit that provides income during your lifetime. This benefit may be standard on your annuity contract or available as an optional benefit.
Lock-in feature (also known as “index lock-in”)
A feature, available to you once per strategy term for each elected strategy option, which locks in the strategy’s index value. The lock-in value will be used to calculate earnings at the end of the strategy term. The lock-in value will also be used when a withdrawal is taken or if a death benefit becomes payable before the end of a strategy term.
Market value adjustment (MVA)
An adjustment (either positive or negative) applied to the contract value that may apply when a partial withdrawal or full surrender occurs during the contingent deferred sales charge (CDSC)/surrender charge period. The adjustment is based on changes in interest rates since the contract was issued.
Net asset value (NAV)
The value of 1 share of an underlying mutual fund at the close of regular trading for the New York Stock Exchange.
Net investment results (also known as “investment results”)
The increase or decrease in value of an investment option over a period of time (daily/quarterly/yearly/since the annuity was purchased). May also be referred to as gains and losses.
Non-natural owner
An entity (not a living person), including trusts, estates and charities.
Nonqualified contract
An annuity contract funded with after-tax dollars. In a nonqualified annuity, your investment grows tax-deferred and only the earnings are taxed when you start receiving payments in retirement or withdraw funds from the contract.
Option term (also known as “strategy term”)
A specific number of years used to measure strategy earnings.
Participation rate (also known as “par rate”)
A percentage representing the amount of index market gains that can be credited when calculating your strategy earnings at the end of each strategy term. In some annuities, the participation rate applies only when index performance is positive, while in others it applies to both positive and negative index performance.
Performance lock
A feature which allows you, for a fee, to lock in the current value of an index strategy before the end of a strategy term. Once a performance lock is requested, it cannot be revoked and the entire value of the index strategy is transferred to the fixed strategy until the end of that term.
Protection level
A percentage representing how much of your investment is shielded from index market losses during a strategy term.
Purchase payment(s)
Money you put into your annuity.
Qualified annuity contract
An annuity contract funded with pre-tax dollars. This means that taxes are deferred until you start receiving payments in retirement or withdraw funds from the contract. Qualified annuities are subject to specific IRS rules regarding contributions, withdrawals and taxation outlined in certain provisions of the Internal Revenue Code.
Return of Purchase Payment Guarantee
A feature available with your annuity contract which guarantees a return of your purchase payment (minus any gross withdrawals) if the contract is surrendered as described in the Return of Purchase Payment Guarantee provision of your annuity contract.
Rider
An option that you can choose, based on your individual needs, that is added to your base annuity contract and provides extra features, benefits or guarantees, typically at an additional cost.
Rider anniversary
Each recurring 1-year anniversary after the issue date of a rider.
Rider charge
The additional cost associated with an option or rider that you added to your base annuity contract.
Roll-up crediting period (also know as “roll-up period”)
The period of time, after election of a guaranteed lifetime withdrawal benefit, that the interest rate used to calculate your lifetime income benefit base can increase.
Roll-up interest rate
The simple interest rate used to calculate your income benefit base.
Spousal protection
A feature offered with or added to your base annuity contract which allows a surviving spouse to continue the contract as the sole owner after the first spouse passes away. If, upon the death of the first spouse, the contract value is less than the death benefit value, the contract value will be adjusted by Nationwide to equal the death benefit value.
Spread (also known as “strategy spread”)
A percentage which acts as a deduction in the calculation of index strategy earnings.
Strategy accumulation value (SAV) (also known as “strategy daily accumulation value (SDAV)”)
The value of a strategy term option if unrealized strategy earnings were credited to the strategy value as of a given date before the end of a strategy term.
Strategy daily accumulation value (SDAV) (also known as “strategy accumulation value (SAV)”)
The value of a strategy term option if unrealized strategy earnings were credited to the strategy value as of a given date before the end of a strategy term.
Strategy earnings (also known as “index account earnings” and “index strategy earnings”)
The interest credited (which can be positive, negative or equal to $0) at term-end to the annuity, based on the performance of your chosen index.
Strategy spread (also known as “spread”)
A percentage which acts as a deduction in the calculation of index strategy earnings.
Strategy term
A specific number of years used to measure strategy earnings.
Strategy term-end date (also known as “term-end date”)
The last day of a strategy term for a strategy option.
Strategy term-start date (also known as “term-start date”)
The first day of a strategy term for a strategy option.
Strategy value (also known as “index strategy value”)
The closing value of an index as disclosed by the market index provider.
Surrender charge (also known as “contingent deferred sales charge or CDSC)”)
A charge that may be assessed on any withdrawals or full surrenders prior to the end of the CDSC/surrender charge period. This charge is intended to cover expenses incurred in connection with the sale of the annuity contract.
Surrender value
The amount available upon full surrender of the contract.
Unit value
Used to calculate the amount allocated to the variable investment options in your annuity contract. The unit value is determined by multiplying the net asset value (NAV) of each investment option by the number of units owned.
Withdrawal
A distribution of a portion of the contract value from your annuity contract.