Glossary
At Knighthead Life, we design straightforward, reliable annuity products to help you chart your course to retirement with confidence.
A
Accumulation Period
The accumulation period is the time when the owner makes contributions and the contract credits interest.
Accumulated Value
Accumulated value is the sum of a contract’s value and any unvested premium bonus.
Annuitant
An annuitant is the person who receives annuity payments. Often the same person as the owner.
Annuitization
Annuitization is the process of converting the Accumulated Value into a regular series of payments.
Annuity
An annuity is a contract with an insurance company that helps you grow, protect, and convert your savings into steady income payments.
B
Basis Points (bps)
A basis point is a unit used to measure changes in interest rates. 100 basis points equal 1%.
Beneficiary
A beneficiary is the individual or entity named in an annuity to receive the death benefit payment(s).
Break-Even Point
The break-even point is when the total payments received from an annuity equals the amount they originally invested.
C
Cash Surrender Value
The cash surrender value is the accessible portion of the Accumulated Value that can be withdrawn, borrowed against, or received during the term of the contract.
Compound Interest
Compound interest is interest calculated on both the original premium and the accumulated interest.
D
Death Benefit
The death benefit is the amount that can be paid to the beneficiary if the annuitant dies before the annuity is fully paid, often avoiding probate.
Direct Rollover
A direct rollover is a direct transfer of retirement funds from one qualified plan to another, avoiding immediate tax liability.
F
Fixed Annuity
A fixed annuity is an annuity that provides a guaranteed rate of return and delivers predictable income over time.
Fixed Index Annuity (FIA)
A fixed index annuity is an annuity that, like a traditional fixed annuity, guarantees a minimum interest rate while also offering the potential for additional interest tied to the performance of a market index.
Fixed Rate Guarantee
A fixed rate guarantee provides a specific interest rate for a chosen period.
I
Index
An index is a measure of the performance of a group of assets (stocks, bonds, or commodities for example) often used as a benchmark for the market or market sector.
Interest Rate
The interest rate, or rate of return, is the rate at which the annuity contract’s value grows over time, with fixed rates growing at a specified rate and index-based strategies growing according to the performance of the underlying index.
L
Liquidity
Liquidity refers to the ability to access an annuity’s funds without penalties or charges.
M
Market Value Adjustment
A market value adjustment (MVA) is an annuity contract feature that may increase or decrease the value of an annuity when funds are withdrawn before the end of a guarantee period, based on current interest rate conditions. Generally, the MVA is a negative adjustment if interest rates are higher at the time of withdrawal than issuance and the MVA is a positive adjustment if interest rates are lower at the time of withdrawal than issuance.
Multi-Year Guaranteed Annuity
A multi-year guaranteed annuity (MYGA) is a financial product that provides a fixed, guaranteed interest rate for a specified period, with returns credited directly to the contract.
P
Participation Rate
The participation rate is the percentage of an index’s gain that is used to calculate interest credited to an indexed annuity. For example, if a participation rate is 50% and an Index performs with 10% interest, 5% interest will be credited to the account.
R
Required Minimum Distribution
Required Minimum Distributions (RMDs) are the IRS-required annual withdrawals from retirement accounts after the account holder reaches a certain age. RMDs are designed to ensure taxes are paid on deferred savings.
Rider
A rider is an addition to an annuity contract that provides extra benefits or modifies the terms of the contract.
S
Surrender Charge
A surrender charge is a fee assessed when funds are withdrawn from an annuity before the end of the designated period.
Surrender Value
The surrender value is the amount a contract owner can receive if the annuity is surrendered before maturity or the annuitant’s death.
Simple Interest
Simple interest is interest calculated solely on the original principal, without compounding on previously earned interest.
T
Tax Deferral
Tax deferral is a feature that allows earnings on a financial product, such as an annuity, to grow without being taxed until they are withdrawn.
Tax Qualified Annuity
A tax qualified annuity refers to the status of an annuity that meets tax code requirements, allowing contributions and earnings to receive favorable tax treatment.
V
Variable Annuity
A variable annuity is a contract that is subject to the performance of selected market investment options (subaccounts). Unlike a fixed annuity, a variable annuity’s value can fluctuate with market performance.