Annuity 101

If an individual purchases an annuity, he/she is protected by a state guaranty association
in the unlikely event that the insurance company has financial trouble. Guaranty
associations are created by state law to assure that the claims of an insolvent insurance
company’s resident policyholders will be paid, subject to the limits of the law. All
insurers authorized to write life insurance, health insurance, and annuities in the state are
required to be members of the association.

RENEWAL RATES
The interest rate is credited to an annuity in the years following the initial rate. The renewal rate and the new money rate differ in the following respects:
• The investments that the Insurer is buying today are known as the new money rate.
• The investments the Insurer bought when the annuity was originally purchased are known as the renewal rate.

The Contract Owner should carefully investigate the Insurer’s renewal rate strategy for
any differences.

ANNUITY RISKS
The potential for long-term growth in an annuity is exceptional. However, as with any type of investment, caution and scrutiny are necessary. Their potential is dependent upon the market and the investments chosen.

ADVANTAGES
• An annuity is a safe vehicle for investment and can be easily monitored.
An annuity offers tax-deferred growth on earnings.
• An annuity provides resources that can last as long as needed.
• An annuity can offer a money back guarantee.

QUALIFIED
The term Qualified refers to whether the annuity is a part of an employee benefit plan that has met certain requirements, or becomes “qualified” under the Internal Revenue code, such as an IRA (Individual Retirement Account) or a TSA (Tax Sheltered Annuity). A qualified annuity is one that is used in connection with a qualified retirement plan.

Simply put, a qualified retirement plan differs from a non-qualified arrangement in that contributions made into the qualified annuity are income-tax deductible to the employer and to the account holder in the case of an IRA and TSA.






A non-qualified annuity may be purchased by any individual and is not associated with an employer-sponsored retirement plan or an IRA or TSA. The contributions to a non-qualified annuity are not tax-deductible. While “non-qualified” may sound like a negative, it has nothing to do with the qualifications of the policy or the company issuing the annuity.