Premium - The payment made to keep an insurance policy current and in force. Principal - The money on hand that is to be deposited in order to earn income. In an annuity, the principal is the amount of money you have invested. In a single-premium annuity, the principal is deposited all at once, in a flexible annuity the principal includes the original investment, as well as subsequent investments. Money in your CDs or other investments does not have this built in advantage.
Annuities are an excellent way of avoiding the hassles of a lengthy probate.
Surrender charge - The penalty for making a withdrawal against the cash value of an annuity or mutual fund. Typically, the surrender charges are reduced annually, until they are ultimately eliminated. Tax deferral - Postponing the payment of taxes. A variable annuity allows you to maximize the growth opportunities of investing in stocks, bonds and other securities by deferring any taxation of your potential gains into the future. This way, you can allocate your investment dollars among an array of portfolios that invest in U.S. and International stocks, bonds, and other securities to help you create a portfolio which closely matches your tolerance for risk versus reward.