INDEXED ANNUITIES - Success CE

INDEXED ANNUITIES

COPYRIGHT ? 2008 AFFORDABLE-SUCCESS-FIRSTCHOICE-CLIENTELL CONTINUING EDUCATION 2 Corporate Plaza Drive, Suite 100 Newport Beach, CA 92660 (949) 706-9425 (A member of the Success CE Family of Companies)

? Copyright 2008 All Rights Reserved. No part of this publication may be used or reproduced in any form or by any means, transmitted in any form or by any means, electronic or mechanical, for any purpose, without the express written permission of Success Continuing Education. This publication is designed to provide general information on the topic presented. It is sold with the understanding that the publisher is not engaged in rendering any legal or professional services. Although professionals prepared this content, it should not be used as a substitute for professional services. If legal or other professional advice is required, the services of a professional should be sought.

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TABLE OF CONTENTS

INTRODUCTION......................................................................................................... 1 COURSE DESCRIPTION AND OBJECTIVES ..................................................................... 1

CHAPTER 1................................................................................................................ 3 DEFINITION AND TYPES OF ANNUITIES ......................................................................... 3 VARIABLE INSURANCE PRODUCTS............................................................................ 4 FIXED INSURANCE PRODUCTS ................................................................................. 4 TWO-TIRED ANNUITIES ........................................................................................... 5 CHAPTER 1 REVIEW QUESTIONS ............................................................................. 7

CHAPTER 2................................................................................................................ 8 ANNUITY CONTRACT PROVISIONS ............................................................................... 8 INTEREST RATES .................................................................................................... 8 BONUS RATES........................................................................................................ 8 RENEWAL RATES.................................................................................................... 8 MINIMUM GUARANTEED RATES................................................................................ 9 ANNUITY PARTIES AND ISSUE AGE GUIDELINES......................................................... 9 Annuity Date ............................................................................................................ 10 SURRENDER AND WITHDRAWAL WAIVERS .............................................................. 10 Death Benefit Waiver ............................................................................................... 10 Nursing Home Waiver .............................................................................................. 10 Terminal Illness Waiver ............................................................................................ 11 Disability Waiver....................................................................................................... 11 Unemployment Waiver ............................................................................................. 11 Premium Payments .................................................................................................. 11 Withdrawal and Surrender Charges ......................................................................... 11 Market Value Adjustments ....................................................................................... 12 Contract Administration Charges and Fees .............................................................. 13 Withdrawal Privilege Options.................................................................................... 13 ANNUITIZATION OPTIONS....................................................................................... 13 Period Certain .......................................................................................................... 14 Amount Certain ........................................................................................................ 14 Straight Life Annuity ................................................................................................. 14 Life Income With Period Certain............................................................................... 14 Life Income With Amount Certain............................................................................. 15 Joint and Survivor .................................................................................................... 15 DEATH BENEFITS.................................................................................................. 15 PRINCIPAL GUARANTEE AND LOAN PROVISIONS ...................................................... 16

INDEX CREDITING STRATEGIES .............................................................................. 17 Floor or Minimum ..................................................................................................... 17 Participation Rate..................................................................................................... 18 Spread, Margin or Fee ............................................................................................. 18 Cap .......................................................................................................................... 18 Binary or Triggered Specified Rate........................................................................... 19

GENERAL............................................................................................................. 19 Period of the Interest Credit ..................................................................................... 20 Financial Index ......................................................................................................... 20 Indexed Value Percentage Change.......................................................................... 21

RIDERS................................................................................................................ 27 BENEFIT RIDERS .................................................................................................. 27

Long-Term Care Benefit Rider ................................................................................. 27 Nursing Home Waiver of Withdrawal Charge Provision............................................ 28 Guaranteed Minimum Withdrawal Benefit Riders ..................................................... 28 Guaranteed Minimum Death Benefit Riders ............................................................. 28 CHAPTER 2 REVIEW QUESTIONS ........................................................................... 29

CHAPTER 3.............................................................................................................. 31 ADVANTAGES AND DISADVANTAGES OF ANNUITIES .................................................... 31 INCOME DISTRIBUTIONS ........................................................................................ 33 Life Annuity with Period Certain ............................................................................... 34 Life Annuity with Installment Refund......................................................................... 34 Life Annuity without Refund...................................................................................... 34 Joint and 50% Survivor Annuity................................................................................ 34 Joint and 2/3 Survivor Annuity.................................................................................. 35 Joint and Survivor Annuity with Period Certain ......................................................... 35 Fixed Period Installments ......................................................................................... 35 Fixed Amount Installments ....................................................................................... 35 TAX RAMIFICATIONS OF ANNUITIZATION -- NONQUALIFIED ANNUITIES ...................... 35 The Annuitant or Owner ........................................................................................... 35 The Beneficiary ........................................................................................................ 36 QUALIFIED ANNUITIES ........................................................................................... 37 Distributions ............................................................................................................. 37 CHAPTER 3 REVIEW QUESTIONS ........................................................................... 38

CHAPTER 4.............................................................................................................. 39 FIXED INDEXED LIFE PRODUCTS................................................................................ 39 DISTINGUISHING CHARACTERISTICS BETWEEN FIXED AND VARIABLE PRODUCTS ....... 40 FIXED INDEXED LIFE INSURANCE VERSUS FIXED INDEXED ANNUITIES........................ 41 The Pros and Cons .................................................................................................. 42 Index Strategies ....................................................................................................... 43 Terminology ............................................................................................................. 43 Mechanics -- How Interest Is Credited .................................................................... 44

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Terminology Associated with Multiple Segments or Buckets .................................... 45 Timing of Premium Allocation to Indexed Strategies ................................................ 45 Life Insurance Policy Charges.................................................................................. 46

Premium Load...................................................................................................... 46 Cost of Insurance Charge..................................................................................... 46 Expense Charges................................................................................................. 46 The Guaranteed Net Cash Value ......................................................................... 47 Death Benefit ....................................................................................................... 47 Account Value ...................................................................................................... 47 Cash Value........................................................................................................... 47 Penalty Free Withdrawal ...................................................................................... 47 Guarantees .......................................................................................................... 47 Tax Treatment -- Surrenders/Withdrawals............................................................... 48 Tax Consequences of Loans and Withdrawals......................................................... 49 RIDERS................................................................................................................ 50 Accelerated or Terminal Illness Benefit Rider........................................................... 50 Waiver of Surrender Charges................................................................................... 50 Other Riders............................................................................................................. 50 ILLUSTRATIONS .................................................................................................... 50 Annual Report -- Notice to Policyowners ................................................................. 52 SUITABILITY AND MARKETING PRACTICES -- NAIC SUITABILITY IN TRANSACTIONS MODEL ACT ......................................................................................................... 54 Contract Disclosure .................................................................................................. 55 Recordkeeping ......................................................................................................... 55 CHAPTER 4 REVIEW QUESTIONS ........................................................................... 59 CHAPTER 5.............................................................................................................. 60 SPECIAL ISSUES FOR SENIOR CONSUMERS................................................................ 60 SUMMARY AND THE FUTURE ..................................................................................... 62 CHAPTER 5 REVIEW QUESTIONS ........................................................................... 64 ANSWERS TO CHAPTER REVIEW QUESTIONS ............................................................. 65

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