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 Operates	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	25
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
S&P Global (Formerly Standard & Poor's Corporation) 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 Object	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	81
Moral Excellence	81
Virtues	81
EXAMPLE #1	82
EXAMPLE #2	83
EXAMPLE #3	84
EXAMPLE #4	86
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.

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