Words that work when talking about Annuities

It’s no secret that the world of annuities includes a complex array of terms. Understanding their meaning has been a challenge both to financial professionals and the consumers they’re trying to help.

Before long, the professional becomes comfortable with the jargon. But for the consumer wrestling with important decisions about protected income, the conventional language of annuities has been a constant deterrent to understanding. “Because annuities are partly investment and partly insurance, they involve contractual obligations, which means they’re written from a legal standpoint,” says Mike Harris, Educational Advisor to the Alliance for Lifetime Income. “Plus, we create them inside this world that we’re familiar with, so we get comfortable with a certain level of legalese or jargon. But John Q. Public doesn’t live in that world.”

Enter the Alliance’s latest project, the “Annuities Language Glossary: Speaking in the Language of Consumers.” It’s a collection of more than 45 terms for financial professionals to use with pros­pects and clients to help them clearly and quickly understand the key features and benefits of annuities.

 The glossary project supports two of the Alliance’s commitments to make the lan­guage of annuities understandable:

“To simplify and clarify the complex language we use” and “To clearly illustrate the value and impor­tance of annuities and protected lifetime income in providing retirement security to millions of unprotected Americans.”

Keeping it simple

The crux of the problem is that when consumers are confused and uncertain, they don’t act. They need clarity and confidence before they will be comfortable enough to buy any product, even one that industry insiders might feel is so good that it should sell itself.

Harris points to the word “rider” as a good example of the challenge. “What’s a rider?” asks Harris. “What does it ride on? It’s one of those terms that has typically gotten in the way.” Rider may seem innocuous and simple to industry insiders. Yet it typically means nothing to annuity prospects or clients.

“So, let’s think about what a rider does, Harris says. “It’s connected to your con­tract. You can take it or leave it, maybe add it now or remove it later. Essentially, it’s an optional benefit. So, let’s call it that—an optional benefit. That way, we don’t need to explain that it rides on the contracts. We don’t need to remove the term ‘rider’ from our internal discussions, but when explain­ing the concept to a client, let’s use a better, clearer way to describe what that rider is and what it does.”

How to solve this challenge? Listen to consumers

To make the language of annuities simple, easy to understand, and transparent to the general public, the Alliance conducted extensive research, including a nationwide survey and tested proposed terms with 1,000 consumers. The result: identification of problem words and phrases as well as better, clearer, more effective alternatives that resonate with the public.

“When we speak in language that people can understand, we not only make annuities more relatable and understandable, but we can also improve decision making, leading to better outcomes for tens of millions of Americans,” the Alliance explains in a discus­sion guide that accompanies the glossary.

Some alternatives to consider using

The glossary and accompanying discussion guide flag several commonly used terms and suggests alternatives that financial professionals can consider using instead.  For example: 


Instead of… Say this… Why
Financial independence

Financial security

Easier to understand
Market volatility Market ups and downs Simple, straightforward
Guaranteed income Protected lifetime income Stronger, more relevant, doesn’t trigger need for disclosures

Other examples include:

  • Rather than use the term “qualified deduction,” which means something to an industry insider, make it clearer by saying “funded with pre-tax dollars.”
  • Instead of referring to a “subaccount,” use the term “investment options.”
  • While “death benefit” might sound confusing and have a negative tone, “beneficiary benefit” puts a more positive spin on the product feature.
  • A “surrender charge” is classic industry jargon. But an “early withdrawal fee” tells consumers exactly what they can expect: If they make an early withdrawal, they’ll pay a fee.

Replace fear with trust

Replace fear-related phrases with trust-building terms that connect with client goals and positive aspirations. Consider messages such as:  Create a comfortable retirement. Maintain your lifestyle. Make sure your family is taken care of when you die. Retire the way you want to.

“Once we see things from the perspective of the layperson, we can get out of our own way,” Harris said. “It’s like cleaning the windshield so you can see more clearly what you’re looking at and understand it better and more intuitively.  Ultimately, our goal is to help consumers understand this better and make good decisions.”

Connect with your financial professional to learn if an annuity is right for you.