Exclusion Ratio
Updated: 11 March 2024
What Does Exclusion Ratio Mean?
Exclusion ratio is the amount paid to the annuitant that represents the return of investment rather than income from the annuity. This amount is not subject to taxes. It is received along with the taxable payment of the purchased annuity.
Insuranceopedia Explains Exclusion Ratio
When the owner of an annuity starts to get paid (assuming he or she has paid the annuity in full), the payment he or she receives can be classified into two: taxable and non-taxable.
The taxable part is perceived as income he or she gets from the annuity (or even replacement income since annuity payment comes during retirement).
The non-taxable part or the exclusionary ratio is the way the owner of the annuity can recoup his or her investment. The investment for annuity is hundred percent recoverable.
Related Definitions
Related Terms
Related Articles
Water and Flood Insurance: 6 Things That Aren’t Covered
Insurance Self-Service Portal: The Future of Customer Experience
Blockchain’s Impact on Transforming the Insurance Landscape
What Every College Student Should Know About Renters Insurance
Guidance for Nurses: Five Essential HIPAA Compliance Tips
Insuring Your Financial Future: the Crucial Role of Accounting in Insurance
Related Reading
Revealing the Most And Least Popular U.S. Insurance Companies
What Students Need to Know About Insurance Coverage During Internships
A Roadmap for Students Interested in the Insurance Industry
Strong Identity Verification in the Insurance Sector
How to Avoid Online Insurance Scams
How to Get Into the Insurance Industry With a Finance Degree