Dominator Plus SM Annuity Statement of Understanding

Transcription

1 Allianz Life Insurance Company of North America PO Box Minneapolis, MN Dominator Plus SM Annuity Statement of Understanding Thank you for considering the Dominator Plus Annuity. We want to be sure that you are aware of its benefits and features, as well as the potential costs and risks associated with the purchase of your contract. Please read the following summary, and discuss all aspects of the contract thoroughly with your agent. If you need additional clarification on any of the items listed below, please refer to the Dominator Plus Annuity contract. Once you have read this summary, please sign the last page to confirm you understand the contract you are considering. How does the Dominator Plus Annuity work? The Dominator Plus Annuity is a single-premium, deferred, fixed annuity with a market adjustment (MVA). That means predictable interest is calculated and credited to your annuity s daily, based on rates established by Allianz. Your annuity s interest rate will never be less than 1.5% in all contract years. Although Allianz establishes the interest rate you receive, it is actually determined based on two choices you make at the time of application: 1. You will choose how much money you place in your Dominator Plus Annuity. Larger premium payments may qualify for higher interest rates. 2. You will choose how long you want Allianz to guarantee the interest rate we credit to your contract, selecting an available interest rate (or GIR ) period of 4 to 10 years (Note: Not all guaranteed periods may be available). The longer you want us to guarantee the rate we credit to you, the higher your interest rate will generally be. After the first GIR period, you will have the option to select another available GIR period. You will receive the interest rate declared by Allianz at that time for the GIR period you select. Unless you select a different GIR period within 30 days of the end of each GIR period, the new GIR period will change to one year. Please ask your agent for the initial interest rate that corresponds to your planned premium amount and initial GIR period. What are the various s of the Dominator Plus Annuity, and how are they calculated? The first thing you should know is that, throughout the life of your annuity contract, your Dominator Plus Annuity will actually have three separate s. Which one you receive will depend on when and how you take money out of the annuity. Those s are the contract s: Accumulation Cash surrender Guaranteed minimum Withdrawals will decrease all three of your contract s s. Accumulation. The accumulation equals the premium you pay into the contract plus the fixed interest you earn. Cash surrender. The cash surrender is your accumulation minus a 10-year decreasing surrender charge, plus or minus a market adjustment. The surrender charge and MVA may result in a loss of some or all of your fixed interest earned and a partial loss of premium. This means that you may receive less than the amount of premium you put into the contract. We discuss surrender charges and the MVA later. Guaranteed minimum. In addition to the two s just mentioned, we provide a guaranteed minimum with all fixed annuities. The guaranteed minimum will generally be your lowest contract. You would receive your contract s guaranteed minimum only if it were higher than your contract s cash surrender described above. The guaranteed minimum is equal to 90% of your single premium submitted, growing at an annual interest rate of 3%. What is a surrender charge? The surrender charge is the penalty you pay to surrender (cancel) all or part of your contract during the 10-year surrender charge period. The surrender charge starts at 9% of the contract s accumulation, then gradually decreases by 0.075% on each contract monthiversary. The surrender charge on the last day of contract year 10 will be 0.075%. On the first day of your 11th contract year it will permanently drop to zero. Contract Year Surrender Charge 9% 8.10% 7.20% 6.30% 5.40% 3.60% 2.70% 1.80% 0.90% 0% Please note: If you select a 4, 5, 6, 7, 8, or 9 -year GIR period, the surrender charge is waived on any amount you take out of your contract during a 30-day window directly following the completion of that initial GIR period. This is described in greater detail later in this document. Page 1 of 5

2 I m not familiar with the term market adjustment. What is it? The market adjustment, or MVA, is a factor that acts to counterbalance the overall change in U.S. Treasury interest rates while you ve owned your Dominator Plus Annuity. So, if you decide to take all or part of your money out of your contract, the market adjustment can either increase or decrease the amount you receive. When you receive your contract, please review it carefully for additional details on the MVA and how it is calculated. For now, you should understand that the MVA is inversely related to the change in interest rates between the time your GIR period begins and when you surrender your contract. In general, this means: If interest rates have increased, the effect of the MVA will likely lower your contract s cash surrender. This means that you bear some risk associated with increases in interest rates. If rates have gone down, you will likely have a higher cash surrender due to the effect of the MVA. In general, as your contract nears the end of any GIR period, the MVA has a smaller effect. At the end of any GIR period, there is no MVA. Can you show me how the surrender charge and MVA would affect a sample Dominator Plus Annuity? A complete chart showing hypothetical s for the Dominator Plus Annuity is presented at the end of this document. Please look it over carefully, and discuss it thoroughly with your agent. How do I avoid surrender charges and MVA and get my contract s highest? You can receive 100% of your annuity s full accumulation in a single lump-sum payment (and avoid both surrender charges and MVA). Here are your lump-sum options: You can choose to keep the contract in force for 10 years, by selecting a GIR period of 10 years, or by choosing a combination of GIR periods that total exactly 10 years, then choose a new GIR period of 1 year. The surrender charge will have expired and the MVA will not be applicable, so you can take your contract s full accumulation as a lump-sum payment at any time (unless you renew for a GIR period of 2 years or more on a later contract anniversary). You can also select a GIR period of at least 4 years, keep the contract in force for that GIR period, and then surrender it within the 30 days immediately following that contract anniversary. You will receive your contract s full accumulation in a lump-sum payment without surrender charges and/or MVA. Note: The only time during the first ten contract years that the surrender charge can be avoided is during the 30-day window following the expiration of any GIR period of at least four years. Surrender charges will apply at any other time during the first ten contract years. The MVA will always apply if you surrender your contract during a GIR period of two years or more, no matter how many contract years have passed. The market adjustment will be zero, however, during any 1-year GIR period. It will also be zero after any GIR period ends, until you elect to begin a new period of at least two years. If you prefer, you can receive income based on your annuity s full accumulation without surrender charges and/or MVA in regularly scheduled payments over a period of time rather than a single lump sum. This is called annuitization, and you have the following annuitization options: 1. Any time after the first contract year, you can take payments of both principal and interest over a period of 10 years or longer (up to life). 2. Any time after the fifth contract year, you can take interestonly payments over the next five years. After five years of interest-only payments, you can then take your full accumulation in a lump sum payment. Please note: Even when surrender charges and MVA are not a factor, there may still be tax consequences. See Are there any tax consequences if I withdraw money? later in this document. When I reach the end of a GIR period, do I have an option to select another GIR period? You may leave your money in the contract and allow it to continue its tax-advantaged growth, until you begin receiving annuity payments. After each GIR period, you may select another available GIR period. You will receive the interest rate declared by Allianz at that time for the GIR period you select. What happens if I cancel my contract before the end of a renewal GIR period? That depends on when you cancel the contract. If you have held the contract for ten years, surrender charges will have expired and you will receive your contract s accumulation plus or minus the MVA. If you have held the contract for less than ten years, you will receive the cash surrender, which may be less than the amount of premium you put into the contract. What happens if I don t select a new GIR period, or surrender or annuitize my contract when I reach the end of a GIR period? If you do not contact us within 30 days after the end of your GIR period, a new GIR period with a duration of one year will begin automatically. Allianz will determine and lock in the guaranteed interest rate that will be in effect throughout the new GIR period. What are my options for receiving annuity payments? After you keep your contract in deferral for at least one contract year, you can choose to receive annuity payments in any of the following ways: Installments for a guaranteed period You can choose to receive annuity payments in equal installments for a period from 10 to 30 years. Each installment would consist of part principal and part interest. Installments for life You have the option to receive annuity payments in equal installments for the rest of your life. Payments end upon your death. Installments for life with a guaranteed period You can choose to receive annuity payments in equal installments for Page 2 of 5

3 the rest of your life. Upon your death, the balance of the guaranteed period, if any, will be paid to your beneficiary the same way as previously selected. The guaranteed period may be 5, 10, 15, 20, 25, or 30 years. Installments for a selected amount You may select to receive annuity payments in equal installments of an amount that you choose, as long as the payments last for at least 10 years. Payments continue until your accumulation and interest are gone. Joint and survivor You can select to have equal installments paid until your death with additional payments to your named survivor. In this case, payments to your named survivor would continue until his or her death at 100%, 2/3, or 1/2 of your original installments, based on your selection. After you keep your contract in deferral for at least five contract years, the following additional option becomes available: Interest only You have the option to receive interest-only annuity payments for five years. Interest will be paid as earned based on your then-current accumulation. After five years of taking interest-only payments, you may then take your accumulation as a lump-sum payment. Can I take money out of my annuity without incurring a surrender charge or MVA during the 10-year surrender charge period? It s quite possible you will want money from your annuity contract somewhere down the road. But you may not need it all. We have a variety of ways you can get money out of your annuity without contract penalties (that is, the surrender charge and/or MVA), including: Free withdrawals Contract loans Required minimum distributions Our Nursing Home Benefit How can I take a free withdrawal from my contract? A penalty-free partial withdrawal will not be subject to a surrender charge or MVA, although taxes and tax penalties may apply. A penalty-free partial withdrawal will reduce each of your guaranteed minimum and accumulation by the partial withdrawal amount. If the partial withdrawal is not penalty-free, your guaranteed minimum will be reduced by the partial withdrawal amount and your accumulation will be reduced by the partial withdrawal amount and any associated surrender charge or MVA. To be penalty-free, the cumulative partial withdrawal amount within a contract year must not exceed 10% of your total premium paid. We will recalculate any penalty-free partial withdrawal as if it were not penalty-free if you request a full surrender within the same contract year that you take the penalty-free partial withdrawal. What if I want to take a contract loan? Loans are available on nonqualified annuities. You can borrow up to 50% of your contract s cash surrender (up to a $50,000 maximum). Like any loan, contract loans are subject to an annual interest charge, but they avoid contract penalties as long as they are repaid with interest. Please note: Loans on nonqualified annuities may be taxable as ordinary income at distribution, and if taken prior to age 59 1 /2 may be subject to a 10% tax penalty. I understand I may have to take required minimum distributions someday. Does my annuity allow these? Based on your age (usually 70 1 /2 or older) and the tax designation of your contract (IRA, SEP, etc.) you may be required to take minimum distribution payments. If they are taken annually in December or monthly throughout the year, required minimum distributions (RMDs) are not subject to surrender charges and/or MVA, although they will reduce the amount available for free withdrawals. You may not exceed the annual RMD amount specified by the IRS, which will be based on your age and the of your contract. Allianz will send a required minimum distribution only upon your written request, and only for the contracts you have with us. How can your Nursing Home Benefit help me access my money without a surrender charge and/or MVA? After the first contract anniversary, if you are the contract owner and become confined to a nursing home for 30 out of 35 consecutive days, your full accumulation can be paid to you in annuity payments over as little as five years. What happens if I cancel my contract? That depends on when you cancel it. This contract is designed for people who are willing to allow their assets to build for the full length of their selected initial GIR period (or longer). The contract can be surrendered without surrender charges or MVA within 30 days following any GIR period of four years or more. Additionally, as we ve discussed, you can fully surrender (cancel) your contract at any time after your 10-year surrender charge period expires and get your annuity s accumulation plus or minus the MVA. If you take all or part of your money out of your annuity contract at any other time or under any circumstances other than those we ve just described, the amount you receive will be subject to a surrender charge and may be subject to an MVA. This could result in the loss of fixed interest earned, and a partial loss of principal. For information about possible tax consequences, see Are there any tax consequences if I withdraw money? Are there any tax consequences if I withdraw money? Regardless of whether or not a withdrawal is subject to a contract penalty, when you take money out of your annuity it may be taxed as ordinary income. In addition, any amount you receive from an annuity prior to age 59 1 /2 may be subject to a 10% federal tax penalty. These taxes and tax penalties may result in a loss of fixed interested earned previously, and a partial loss of principal. Allianz does not provide legal counsel or tax advice, so please consult a tax or legal advisor. Page 3 of 5

4 Are there any tax consequences if I exchange, annuitize, transfer ownership, or assign the benefits of my contract? A full or partial exchange of an existing deferred annuity contract for another deferred annuity contract may have tax consequences, depending upon how the exchange occurs and the tax rules applicable to the source of funds. It is important that you consult a legal or tax advisor to be sure that you are complying with all required tax rules before performing an exchange of contracts. Annuitizing a contract means that you have elected to receive a series of annuity payments (for example, over your life, your life expectancy or a fixed period of time). All or a portion of your annuity payments will be taxed as ordinary income to you. Annuitizations before age 59 ½ may also be subject to a 10% federal tax penalty depending upon how the payments are structured. There also may be tax consequences if you transfer ownership or assign the benefits of your contract. Allianz does not provide legal counsel or tax advice, so please consult a legal or tax advisor for further information about tax consequences before you annuitize, transfer ownership, or assign the benefits of a contract. How will I know how my contract is doing? You will receive an annual report following each contract anniversary. This report will show your contract s current accumulation (including fixed interest earnings applied to it), along with its cash surrender and any withdrawals. The annual report will also show the interest rate for your contract that year. What happens if I die while my Dominator Plus Annuity is still in deferral? Your beneficiary(ies) will receive the greater of the contract s accumulation or its guaranteed minimum. In either case, they can elect to receive a lump-sum payment or payments over the course of five years (or longer). Are there any other important points I should know about annuities like the Dominator Plus Annuity? If you are purchasing our Dominator Plus Annuity to replace an annuity you currently own, compare the two products carefully. The benefits and guarantees offered by the two products may be different. Keep in mind that you may incur a surrender charge and/or MVA when you cancel your existing annuity to purchase your Dominator Plus Annuity. You will also begin a new surrender charge period, and will be subject to an MVA, with your purchase of the Dominator Plus Annuity. Purchasing the Dominator Plus Annuity within an IRA or other qualified retirement plan that already provides tax deferral under the Internal Revenue Code results in no additional tax benefit to you. If you are considering the purchase of a Dominator Plus Annuity in a qualified retirement plan, you should therefore base your decision on its other benefits and features as well as its risks and costs. Page 4 of 5

5 Can I see all the various s and factors that impact the of my Dominator Plus Annuity? The following chart shows hypothetical s for a Dominator Plus Annuity with a 5-year guaranteed interest rate (GIR) period, with successive 1-year GIR periods after the initial period ends. The hypothetical annuity is purchased with a single premium of $100,000 and an assumed initial annual interest rate of. Notice the relationship between the accumulation and the cash surrender. You can see that the contract s accumulation and cash surrender are identical during the 30-day window after the 5-year GIR period ends, and also after the 10-year surrender charge period ends. You can also see that the MVA does not apply during the 1-year GIR periods. The guaranteed minimum is listed for your reference. You would receive the guaranteed minimum only if it were greater than the cash surrender. End of contract year Guaranteed interest rate during year Total credited amount during year Accumulation Surrender charge MVA rate (5-year Treasury) MVA Factor Cash surrender Guaranteed minimum Issue $100, % 3.00% $ 91,000 $ 90,000 1 $4,500 $104, % 3.30% $ 94,941 $ 92,700 2 $4,703 $109, % 2.75% $102,071 $ 95,481 3 $4,914 $114, % 2.65% $107,647 $ 98,345 4 $5,135 $119, % 3.70% $112,062 $101,296 5 $5,366 $124,618 3 $124,618 4 $104, % $5,172 $129, % $125,117 $107, % $5,970 $135, % $132,095 $110, % $6,449 $142, % $139,649 $114, % $6,115 $148, % $146,989 $117, % $6,007 $154, % $154,331 $120,952 This chart shows hypothetical market adjustments and surrender charges based upon your fully surrendering your Dominator Plus Annuity contract immediately after the end of the contract year shown. The MVA factors and Cash Surrender Values are calculated according to formulas that are presented in your contract. 1 Since the MVA rate has increased since the start of the GIR period, the MVA factor is less than 1, which means it will reduce the Cash Surrender Value. 2 Since the MVA rate has decreased since the start of the GIR period, the MVA factor is greater than 1, which means it will increase the Cash Surrender Value. 3 At the end of any GIR period, or during any 1-year GIR period, the MVA is always one and the MVA rate is irrelevant. 4 Identical to the Accumulation Value, thanks to the waiver of surrender charges during a 30-day window after the fifth contract year. I have read the information above. It has been explained to me in complete detail by the agent. I understand that if I wish to receive my annuity s full accumulation, I should follow the terms set out in the section titled, How do I avoid surrender charges and MVA and get my contract s highest? Otherwise, amounts payable under this contract are subject to a surrender charge and/or MVA. These can result in a loss of some or all of the previously credited interest and a partial loss of principal, and may mean that I will receive less than the amount of premium I put into the contract. I have also received and read the Dominator Plus Annuity consumer brochure. I understand that any s shown, other than guaranteed minimum s, are not guarantees, promises, or warranties. I understand that I may return my contract within the free look period (shown on the first page of my contract) if I am dissatisfied for any reason. Owner Date I have presented and provided a signed copy of this disclosure to the owner. I have not made statements that differ from the disclosure form and no promises or assurances have been made about the future s of the contract. Agent/Registered Representative Date Contract series P7100 issued by Allianz Life Insurance Company of North America. Not FDIC insured May lose No bank or credit union guarantee Not a deposit Not insured by any federal government agency or NCUA/NCUSIF Page 5 of 5