Financial services marketers are quite clever at getting you to see their point of view. In their creative genius, they use words that sound appealing to most people, and utilize those words to fit your situation, making what they’ve got to sell sound like your only solution.

The first such word is guaranteed.

You see this word used to amplify income, principal and in some cases, growth. My first question with the use of the word guaranteed is guaranteed by whom? Is your guarantee backed by the 123 Financial Group, the XYZ insurance company or the full faith and credit of the U.S. government?

Needless to say, the guarantor of your guarantee is everything. In general, the stronger the guarantor, the less income you are likely to receive on a guaranteed investment. Conversely, when the guarantor isn’t a blue chip highly rated borrower, the yield to you as the investor is typically higher because of the elevated level of risk associated with your investment.

The word guaranteed is frequently used to describe a stream of income. In the case where income is classified as guaranteed income, it is often from an insurance-based product. When evaluating insurance products to generate guaranteed income, consider the following factors.

Evaluate the credit strength of the guarantor. Be careful if you decide to settle for lower ratings in search of higher income levels. Ask about your options to get out of that investment. Frequently there are surrender penalties and lock up periods or potential consequences to both your income and your cash out value if you change your mind. Also inquire how additional deposits or withdrawals of principal impact your future income stream. And last, ask about the consequences of your death on that guaranteed income stream. In some cases the income merely stops with all principal lost and in others there may be anywhere from a little to possibly a large death benefit associated with your guaranteed income investment.

Tax free is another buzzword frequently thrown around in the wrong context.

For example, we all have heard that life insurance proceeds are received income-tax free. And in most cases that is true. But why don’t the sellers let you know that your life insurance may not be death tax free? Any life insurance policy in which you have incidence of ownership is includable in your gross estate. Unless your policy and the balance of your assets are valued above $5.49 million, you’ll escape federal death taxes. But in many states, such as my home state of Massachusetts, the exclusion is much lower and could subject those death benefit proceeds to state death taxes.

Understand the difference between tax free and tax deferred.

Free is easy to understand, but what tax deferred means is that income and gains may not be taxed until you actually take the money out of any particular investment. Before drawing income from any tax deferred investment understand how that will show up on your tax return first.