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A. M. Best Co. is the oldest annuity rating agency in the world and has been reporting on the financial condition of insurance companies since 1899. Best’s evaluates a company’s Relative Financial Strength and overall performance in comparison with others. Best’s ratings should not be taken as a guaranty of any insurer’s current or future ability to meet its contractual obligations.
In some annuities, the average of an index's value is used rather than the actual value of the index on a specified date. The index averaging may occur at the beginning, the end, or throughout the entire term of the annuity.
The Base Rate is the Current Rate less the Bonus Rate if any. For many annuities the Base Rate and the Current Rate are the same. The Base Rate may not be the same as your contract's "Floor" rate.
A Bonus Rate is the "extra" or "additional" interest paid to your annuity account during the first year. The term "Bonus Rate" also means that extra interest paid as a pure bonus with no vesting requirements to earn it... a true bonus.
This is the "Current" Yield to Surrender and is calculated using the first-year current interest rate and any number of successive years in which the interest rate is guaranteed. Then the calculation uses the base rate through last year in which the surrender charge applies.
The maximum interest rate that can be credited to your equity index annuity policy in a policy year or over the term of the policy.
Insurance companies are listed according to their registered names. Many companies are part of a larger group affiliation, which may include subsidiaries with similar-sounding names. These affiliates may not be legally bound to cover each others’ claims and each separate entity may have a different credit quality rating.
This is the interest rate that an annuity is paying it is the sum of the base rate, if any and the bonus rate, if any. The current rate is set by the insurance company at the time of issue and is guaranteed for specific length of time.
The minimum interest rate that can be credited to your policy in a year or over the term of your contract. The Floor rate may not be the same as your contract's "Base" rate.
This is the "Guaranteed" Yield to Surrender and is calculated only using the guaranteed interest rate for each year through last year in which the surrender charge applies.
The minimum rate of interest insurance company agrees to pay each year on a fixed annuity (usually 3%). Also known as Minimum Guaranteed Interest Rate. The Guaranteed rate may or may not be higher than your contract's "Floor" or "Base" rates.
An equity-indexed annuity is an annuity that earns interest that is linked to a stock or other equity index. One of the most commonly used indices is the Standard & Poor's 500 Composite Stock Price Index (the S&P 500).
The smallest single premium dollar amount the insurance company will accept to issue this policy. Some contracts accept additional deposits once the initial minimum premium is received. These are known as flexible premium contracts.
Participation Index Rate is the amount of the percentage change (which is set by the company) used to determine the amount to be credited to your policy for that year. If the Participation Index Rate was 90% and the percentage change of the S&P 500 Index was 10%. Then the 10% change would be multiplied by the Participation Index Rate of 90% resulting in an Interest Rate of 9.0% being credited to your policy for that term.
For equity-indexed annuities, one of the most common indexing methods, is called annual "reset" or ratcheting. Index-linked interest, if any, is determined each year by comparing the index value at the end of the contract year with the index value at the start of the contract year. Interest is added to your annuity each year during the term.
In some annuities, the index-linked interest rate is computed by subtracting a specific percentage from any calculated change in the index. This percentage, sometimes referred to as the "margin," "spread," or "administrative fee," might be instead of, or in addition to, a participation rate.
The charge for withdrawing money from an annuity before the date agreed upon in the contract. Surrender charges typically are a percentage of the total premium deposited, and the charge decreases to 0 over time as the annuity gets closer to the date it will mature
This is the number of years for which the displayed interest rate is in effect in your annuity. Some contracts credit the same interest rate for the duration of the stated "rate guarantee period". Other contracts credit a bonus rate in the first year and a lower rate for the following years.
Essentially this is the annualized yield of the annuity calculated over the time the surrender charge exists.
Call "Total Return Annuities.com" at 866-866-1999 if you need help with these definitions or anything else at our web site.