Annuities - An Investment Tool

Table of Contents

 

Welcome

 

Chapter 1:  Introduction to the Annuity

1

     Mortality tables

1

     The insurer, contract owner

2

     The annuitant, the beneficiary

3

  Annuity Development

4

     Reinsurance Network

4

     Two-Tiered Annuities

5

How an Annuity Operate?

6

  Investment Options

6

  Immediate Fixed Annuities

6

  Immediate Variable Annuities

8

  Deferred Annuities

9

  Accumulation Annuities

10

Which Annuity is Best?

10

Chapter 2:  Variations of the Annuity

12

     Single-Pay Deferred Fixed Annuity

12

     Accumulation Annuity

12

     Straight-Life Annuity

12

     Lifetime With Period Certain Annuity

12

     Refund Annuity

12

     Two-Tier Annuity

13

     Joint-and-Survivor Annuities

13

     Pre-Retirement Survivor Annuity

14

     Wrap-Around Annuity

14

     CD-like Annuity

14

     Split Annuities

15

     Reverse Annuity Mortgage (RAM)

16

     Private Annuity

17

Equity Indexed Annuities (EIAs)

17

     Qualified Annuities

19

     Tax-sheltered Annuities (TSAs)

21

     Accumulation & Payout Period

22

     Assumed Interest Rate (AIR)

22

     Maximum Exclusion Allowance (MEA)

23

     Explicit & Implicit Fees

24

     Non-Qualified Annuities

24

Chapter 3:  Annuitization

26

     Seven-Pay Life Insurance

27

  Why would a policyholder want to annuitize?

29

  Exclusion Ratio

30

  Bailout Provision

31

Chapter 4:  Rating Systems

32

  Introduction to A.M. Best Rating System

32

  A.M. Best's Company Rating System

33

     Financial Strength Ratings (FSR)

35

     Rating Modifiers

35

  Standard & Poor's Corp. Rating System

36

  Moody's Rating System

37

     Chart

38

  Fitch Rating System

39

     Fitch Rating Actions

40

     International Long-Term IFS Rating Scale        

42

     National Long-Term IFS Rating Scale

44

     International Short-Term IFS Scale

46

  Weiss Research, Inc. Rating System

47

    Additional Notations

48

State Ratings

48

Chapter 5:  Advantages of the Annuity

50

  Safety Record

50

  FDIC, BIF

50

  Pass-through Insurance

51

          The Uniform Gifts to Minors Act

51

  Reserve Requirements

52

  Financial Clout

52

  Rating Services

53

  Performance

53

  Professional Manager / Investment Team

54

  Commission Charges

54

  Withdrawal Options

55

  Guaranteed Death Benefit

55

  Avoidance of Probate

55

  “Per stirpes”

56

  Exempt from creditors

56

Chapter 6:  Disadvantages of the Annuity

58

  IRS Tax Penalty

58

  Surrender Charges

59

  Mortality & Expense Fees

59

  Contract Maintenance Charge

60

Chapter 7:  Annuities verses other Investments

61

Annuities verses the IRA

61

  Why does the IRS use the MAGI as a basis instead of the AGI?

61

  IRA Tax Rules

62

Annuities verses Mutual Funds

64

  SEC

65

Chapter 8:  Variable or Fixed Rate

67

  Which is better, variable or fixed rate?

67

  Fixed Rate

67

  Variable Rate

69

     Aggressive Growth

70

     Growth

71

     Growth and Income

71

     International Stocks

72

     Balanced or Total Return

73

     Corporate Bonds

73

     Government Bonds

74

     High-Yield Bonds

74

     Global and International Bonds

75

     Sector or "Specialty" Portfolios

76

Besides calling the insurer for performance results, are there any other sources that a person can go to?

76

What is DCA?

77

Is DCA similar to SWP?

77

What is an allocation portfolio in a variable annuity?

77

Chapter 9:  Annuity Producer Ethics

79

  Defining Ethics

80

        Greek Word ethos

80

Moral Excellence

81

    Virtues

81

  EXAMPLE #1

82

  EXAMPLE #2

83

  EXAMPLE #3

84

  EXAMPLE #4

85

  EXAMPLE #5

86

Why Be Ethical?

87

  Public Interest

87

Psychological Egoism

89

     Egoists & Egotism

89

     Is it possible to teach ethical behavior to others?

90

     What is the scope of Ethics?

90

     What does it take to be a moral person?

92

  EXAMPLE #1

95

  EXAMPLE #2

95

  EXAMPLE #3

96

  EXAMPLE #4

97

What are our responsibilities to other moral persons?

98

Ethics in Action

99

     Objectivist Ethics

99

What does ethics in action mean?

100

Human Nature

101

  Example

101

  Example

102

  Example

104

  Example

108

  Can ethics and promotional campaigns be integrated?

109

    Sympathy & Empathy

110

  Example

111

Learning to be Ourselves

114

Due Diligence

115

  What does the term actually mean?

115

Suitability Standards

119

Determining Suitability

119

Sales Practices

121

Product Replacement

121

Deceptive Sales Practices

121

Full Disclosure

121

Product Knowledge

122

Identifying Suitability Issues

122

It is Not a Liquidity Issue but Rather a Suitability Issue

124

Churning

124

Twisting

125

 

 

United Insurance Educators, Inc.

8213 – 352nd Street East

Eatonville, WA. 98328

 

(253) 846-1155