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A "fixed" rate of return guarantees positive investment growth and protection of principal.

About Annuities

Fixed Annuities are insurance products that can serve a variety of needs. These policies, assuming the funds are held to the end of the guaranteed period, provide a safe haven for growth as well as wealth preservation given guaranteed investment return and principal repayment. Annuities often have liquidity benefits enabling access to fund in emergencies and generally, offer options to receive predictable income for an agreed period or for the life of the annuitant. Finally, annuities may aid the inter-generational transfer of wealth if structured to pay a death benefit directly to a named beneficiary, thereby avoiding the probate process.

Most personal financial plans have a number of investment categories that have distinct investment objectives. Annuities should be considered a long term investment but for the conservative investor or for a low risk allocation of a larger investment portfolio, fixed annuities may be the right choice.

Glossary of Annuity Terms

Account Value- The Account Value is the sum of all Premiums, increased by accumulated interest, less the amount of any gross withdrawals. The Account Value is not necessarily the same as the Surrender Value.

Accumulation Period- The time period when an Annuity earns and accumulates interest. This time period runs from the date of purchase to the time when the annuity matures, is surrendered, or enters the Payout Phase.

Annuitant- The person or persons on whose life or lives the Annuity is based, primarily for the purpose of Annuitization. The policyholder decides who the Annuitant will be. The policyholder and Annuitant generally are the same person but are not required to be.

Annuitization- The transaction that changes a Deferred Annuity from the Accumulation Period to the Payout Period.

Annuity- An insurance contract issued by an insurance company to provide payments to the holder at specified intervals, usually after retirement. An Annuity has two Periods: Accumulation and Payout.

Beneficiary- The named recipient of an Annuity's value (either Account Value or Surrender Value, depending on the terms of the Annuity) on the death of the policyholder or Annuitant.

Cash Value- The Surrender Value, or amount of money, to be received by the Contract Owner if an Annuity is surrendered. It is typically the Account Value minus Surrender Charges, Withdrawals, and Market Value Adjustment (if applicable).

Death Benefit- The payment made to the named Beneficiary upon the death of the policyholder or Annuitant, as described in the contract.

Deferred Annuity- A type of Annuity that defers payments of income or a lump sum until maturity or until the policyholder elects to receive them.

Distribution Period- The contractually established period during which an Annuity distributes Principal and accumulated interest to the policyholder. Also called the Payout Phase or Income Phase.

Endorsement- A form attached to the Annuity Contract that records a change to the policy, such as a change of name, change in coverage, etc.

Equity Index Annuity- An Annuity in which the earnings are tied to the performance of a market index or indexes (e.g., the Standard & Poor's 500®). An Equity Index Annuity is a type of Index Annuity or Fixed Index Annuity.

Fixed Annuity- A type of Annuity offered by an insurance company that includes a minimum guaranteed interest rate.

Free Partial Withdrawal- A withdrawal that is permitted from an Annuity without a Surrender Charge or Market Value Adjustment, if applicable.

Guarantee Period- The period of time during which interest rates are guaranteed by the insurance company.

Income Period- The contractually established period during which an Annuity distributes Principal and accumulated interest to the policyholder. Also called the Payout Period or Distribution Period.

Market Value Adjustment (MVA)- An adjustment (positive or negative) that is applied when an Annuity is liquidated early. It is designed to share some of the investment risk associated with the Annuity between the contract holder and the company.The concept of the MVA is simple. If you take an early withdrawal or Surrender the annuity (other than a Partial Surrender of no more than the "penalty free" amount, if applicable); and the Annuity has an MVA, you may have a higher or lower Cash Value at the time money is withdrawn. Generally, if interest rates in the market are higher than when you purchased your Annuity, the adjustment may cause your value to be lower. Similarly, if interest rates in the market are lower than when you purchased your Annuity, the Cash Value may be higher than it would be without the MVA.

Maturity- The date when an Annuity contract reaches the stage when the obligation is due and payable.

Multi-Year Guarantee Annuity (MYGA)- An Accumulation Period Annuity that guarantees an interest rate for the full guarantee period.

Partial Surrender- Withdrawing part of the value of an Annuity.

Payout Period- The contractually established period during which an Annuity distributes Principal and accumulated interest to the policyholder or their named payee. Also called Distribution Period or Income Period.

Premium- Money paid into an Annuity by the policyholder.

Principal- The sum total of all actual Premiums put into an Annuity. Equal to Cost Basis in a Non-Qualified Annuity.

Renewal Interest Rate- The interest rate that will be credited after the initial Guarantee Period has expired.

Single Premium Annuity- An Annuity that accepts either a single payment or a number of payments over a very short period of time.

Surrender- Withdrawing the entire value of an Annuity Contract in a single payment.

Surrender Charge- A type of early withdrawal penalty that reduces the Account Value when funds are removed from an Annuity during the Surrender Charge Period.

Surrender Charge Period- The period during which Surrender Charges will be subtracted from an Annuity's Account Value if funds are withdrawn from the Annuity.

Surrender Value- See "Cash Value".

This information is provided as general information about Annuities. It is not specific to the Knighthead Annuity prodcut. Nothing herein shall alter any information or terms contained in Knighthead Annuity's fixed annuity product and only the language of the Contract shall govern.

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