Glossary
Annuity and insurance terms, in plain English.
The acronyms and contract mechanics agents work with every day - GLWB, FIA, MYGA, IUL, caps, participation rates, spreads, persistency, AHIP, appointments - defined vendor-neutral, in language you can read straight to a client. Where a term maps to a Nest tool, the definition links to it.
Annuities
Annuities
- FIAFixed indexed annuity
- A fixed annuity whose interest is tied to the change in a market index (such as the S&P 500) subject to a cap, participation rate, or spread. Principal is protected from index losses - in a negative index year the credited interest is zero, not negative. Backtest FIA strategies
- MYGAMulti-year guaranteed annuity
- A fixed annuity that guarantees a set interest rate for a multi-year term (commonly 3-10 years), similar to a bank CD but tax-deferred. The rate does not change for the length of the guarantee period. Compare MYGA rates
- GLWBGuaranteed lifetime withdrawal benefit
- An optional income rider on an annuity that guarantees the contract owner can withdraw a set amount each year for life, even if the account value falls to zero. The guaranteed amount is usually based on a benefit base that grows by a roll-up rate during deferral. Rank income riders
- Income rider
- An optional add-on to a deferred annuity that provides a predictable stream of lifetime income. The GLWB is the most common form. Riders typically carry an annual charge deducted from the account value. Compare riders by income
- Roll-up rate
- The guaranteed annual growth rate applied to an income rider's benefit base during the deferral period. It grows the figure used to calculate future lifetime income - not the cash value you can withdraw or surrender.
- Accumulation value
- The total value of an annuity contract including premium plus credited interest, before any surrender charges. Also called the account value.
- Surrender value
- The amount a contract owner receives if they cancel the annuity early - the accumulation value minus any applicable surrender charge and rider charges. Also called cash surrender value.
- Surrender charge
- A declining penalty applied when an annuity is surrendered or over-withdrawn during its surrender-charge period (often 5-10 years). The percentage typically steps down each contract year to zero.
- Free withdrawal
- The portion of an annuity (commonly up to 10% of the value per year) that can be withdrawn during the surrender-charge period without incurring a surrender charge.
- Annuitization
- Converting an annuity's accumulated value into a stream of guaranteed periodic payments. Once annuitized, the lump sum is generally exchanged irrevocably for the payment stream.
- An upfront percentage some carriers add to premium at issue, often credited to a separate benefit base. Bonuses are usually paired with longer surrender periods or vesting schedules.
Crediting
Crediting
- Crediting strategy
- The method an indexed product uses to translate index movement into credited interest over a crediting period - for example annual point-to-point, monthly sum, or a two-year point-to-point. Stack-rank strategies
- Cap rate
- The maximum interest an indexed strategy will credit for a crediting period. If the index gains more than the cap, the credited interest is limited to the cap. Learn more
- Participation ratePar rate
- The percentage of an index's gain that an indexed strategy credits. A 70% participation rate on a 10% index gain credits 7%. Often used in place of, or alongside, a cap. Learn more
- SpreadMargin / asset fee
- A percentage subtracted from an index's gain before interest is credited. With a 2% spread, a 10% index gain credits 8%. Spreads are an alternative to caps for limiting credited interest. Learn more
- Point-to-point
- A crediting method that compares the index value at the start and end of a crediting period (e.g. one year) and ignores movement in between. The most common indexed crediting design.
Life insurance
Life insurance
- IULIndexed universal life
- A permanent life insurance policy with a death benefit and a cash value that earns interest tied to a market index, subject to caps, participation rates, or spreads. Premiums and death benefit are typically flexible.
- Illustration
- A carrier-generated, year-by-year ledger projecting how a policy or annuity is expected to perform under stated assumptions - premium, credited interest, charges, cash value, and death benefit by contract year. Build an illustration
- Suitability
- The regulatory standard requiring that a recommended insurance product fits the client's financial situation, needs, and objectives. Documentation of the suitability analysis is generally required at sale.
Commissions
Commissions
- FYCFirst-year commission
- The commission paid on first-year premium for a newly issued policy - usually the largest commission event in a policy's life. Track commissions
- Trail / renewal commission
- Ongoing commission paid in years after the first, typically a smaller percentage of renewal premium or assets, that continues while the policy stays in force. Learn more
- Compensation grid
- The schedule that sets commission rates by product and hierarchy level. IMOs use comp grids and overrides to define what each agent and upline earns on a sale. IMO compensation
Book management
Book management
- Persistency
- The rate at which policies stay in force rather than lapsing or surrendering, usually measured over a trailing period. Higher persistency protects renewal commissions and book value. See book health
- Policy review
- A periodic check of an in-force policy or annuity - for example confirming an FIA's index allocations still fit the client before the next crediting period locks in. Learn more
- AORAgent of record
- The licensed agent officially designated as the servicing agent on a policy, and the party credited with its commissions. An AOR change reassigns that designation.
Licensing & compliance
Licensing & compliance
- AppointmentCarrier appointment
- The authorization a carrier grants a licensed producer to sell its products. An agent must hold both an active state license and a carrier appointment before writing business for that carrier. Track licenses
- AHIPAmerica's Health Insurance Plans
- The annual training and certification many carriers require before an agent can sell Medicare Advantage and Part D plans for an upcoming plan year. Learn more
- E&OErrors & omissions insurance
- Professional liability coverage that protects an agent against claims of negligence or mistakes in the course of selling or servicing insurance. Most carriers require active E&O coverage to appoint an agent.
- IMO / FMOIndependent (or field) marketing organization
- An intermediary that contracts agents with carriers, provides commissions, training, and support, and manages a hierarchy of downline agents. Nest's Team plan is built for running this structure. Nest for IMOs
Put the terms to work
The definitions wire into the tools that use them.
- Index AnalyzerBacktest crediting strategies - caps, participation rates, and spreads - across real index history to see how a design would have credited.
- Living Benefit CalculatorRank GLWB income riders by guaranteed lifetime payout, roll-up rate, and benefit base across the products you write.
- Rate feedCompare MYGA and fixed-annuity rates from the live carrier feed - sortable by term, surrender period, and carrier.
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