Annuitant: This is the person who receives payouts through an annuity contract. On a joint annuity there would be two annuitants. The person who owns the annuity is referred to as the primary annuitant and the other could be called the secondary annuitant.

Annuity Policy: The contract between the owner of the annuity contract and an insurance company where the insurance company agrees to pay specified amounts of money at fixed intervals to the annuitant who is the person receiving payments.

Annuity Payments can be received by the annuitant[s] annually, semi-annually, quarterly, or monthly.

Beneficiary: This is the person who is entitled to receive a death benefit from an annuity that provides for this benefit.

Guarantee Period: Life pay annuities, whether single life or joint life provide that payouts may be guaranteed to be paid for a certain length of time even after the annuitant[s] dies. If the annuitant[s] dies before this guarantee period has been satisfied, and there is a named beneficiary, a lump sum consisting of the difference between payments already made and payments not yet made within the guarantee period, will be paid to that beneficiary. On the other hand, if the annuitant lives beyond the guaranteed period of a life annuity he or she would continue to receive the annuity payments for the balance of their lifetime. Usually, the shorter the guarantee period chosen by the annuitant, the higher the annuity payout and the longer the guarantee period, the lower the annuity payout. Make certain to ask about the implications of the length of the guarantee period in the life annuity you purchase.

Reducing joint life annuities: Lifetime payments for a joint life annuity can be increased by structuring the joint annuity so that, while both annuitants are alive, they get a higher amount of income, but, when one of the annuitants dies, the annual income will decrease by up to 50 percent. Most annuities requested are non-reducing or in other words, it doesn’t matter who dies first, the same income is paid for life to the survivor.

Non-reducing joint life annuities: Most joint life annuities that are purchased, are non-reducing or in other words, it doesn’t matter who dies first, the same income is paid for life to the survivor.

Deferred single or joint life annuities: This kind of annuity is purchased with the first payment commencing on a date that is more than one payment period after the purchase date. If the annuitant[s] dies before the first deferred income payment, the premium will be refunded. Registered annuities can only be deferred up to January 1 of the year in which the annuitant or primary annuitant becomes age 72. It is possible to increase the annual lifetime income of a single or joint annuity by using this deferral period. This works better for registered annuities than for non-registered annuities because taxable income is generated during the deferral period. This means that the person who has purchased a deferred non-registered annuity will receive annual tax receipts for the taxable portion of annual payments during the deferral period even though no actual income has been received. Since deferred registered annuities are tax-sheltered, there are no prior taxable events before payments begin.

Cash Back Annuity: All life annuities provide that payouts be guaranteed to be paid for the lifetime of the annuitant. A cash-back annuity, in addition, provides the unused portion of the capital back if the annuitant dies before all of the original capital has been consumed. The difference between the total value of payments already made and any of the original remaining capital used to purchase the life annuity can be paid out in a lump sum to a beneficiary. In any event, while still alive, even if all capital has been used up, the annuitant receives life annuity payouts for his or her lifetime.

Prescribed or non-prescribed annuities: This is a term related to the method of taxation of life annuities. The income from an annuity purchased with non-registered funds is the same for both prescribed and non-prescribed status. However, prescribed annuities have a level portion of the periodic income attributed to tax. Non-prescribed annuities have a heavier portion of periodic income attributed to tax in the early years of the annuity and less in later years. This results in less tax being paid upfront for a prescribed annuity than for a non-prescribed annuity.

Indexed Annuity: If you choose to have your annuity indexed so that payouts increase annually for the rest of your life anywhere from 1% to 5% you will initially receive a lower payout. Indexed annuities are only issued as non-prescribed [accrual]. The longer you live, the higher your annual annuity income will become. In real life, an indexed annuity generates less income upfront and takes several or more years for the income to recover to the level it would have been at to start from if indexing had not been part of the calculation.

Medical Age Rate Up This kind of annuity is also called an impaired annuity and sometimes an enhanced annuity or an enriched annuity. The actual life expectancy of an annuitant is crucial to the payout of an annuity. If you have a health condition that is expected to shorten your life on this earth, you may be able to bump up the income from your annuity. Not all insurance companies offer this kind of annuity and those that do, have different underwriting requirements.