Variable Dollar Annuity
Definition of "Variable dollar annuity"
Annuity in which premium payments are used to purchase accumulation units, their number depending on the value of each unit. The value of a unit is determined by the value of the portfolio of stocks in which the insurance company invests the premiums. At the time of the payment of benefits to the annuitant, the accumulation units are converted to a monthly fixed number of units. The variable element is the dollar value of each unit. For example, assume that the annuitant pays a monthly premium of $100. If the accumulation unit value during one month is $50, two units are purchased. In another month, if the value of the accumulation unit is $25, four units are purchased. In a third month, the value of the unit is $10, resulting in the purchase of 10 units. This allows the market use of the investment strategy of dollar cost averaging. Accumulation units are credited to the annuitant's account, a procedure that is similar to purchasing shares in a mutual fund.
When income benefits are scheduled to begin, total accumulation units are converted to assume 100 income benefit units per month. The value of the income unit will vary according to the company's stock investments; in one month the annuitant's income might be $1000, in another month $500, in another month $1200. Changes in the investment experience by the insurance company are passed on to the annuitant, but the company absorbs fluctuations in expenses and mortality experience.
Popular Insurance Terms
Detailed descriptive list made available to the survivor (s) of the insured showing: attorney, accountant, insurance agent, and location of important documents such as wills, power of ...
Coverage in excess of that provided by a basic hospital medical insurance plan. After the limits of coverage have been exhausted under a basic plan, major medical then covers medical ...
Statement showing the amount of money owed the agent by the insurance company, according to the contract he or she has with the insurance company. ...
Organization that is part of a preferred provider organization (PPO) in which enrollees select an EPO provider to act as their primary care physician and serve as the gatekeeper. This ...
List and description of valuables, to be utilized in the event an insurance claim must be filed. Included should be: a detailed explanation of possessions that are of special value, such as ...
Difference between the rent paid by a lessee as fixed by a lease prior to destruction of property and the rent received by the lessor after that property has been restored. ...
Investment income. Insurance companies invest part of their premiums that are not immediately needed for claims and administrative expenses. These earnings are critical to an insurance ...
Indemnification for the loss of profits and the continuing fixed expenses. Business interruption insurance is available in these forms: contingent business interruption FORM, EXTRA EXPENSE ...
Same as term Fixed Dollar Annuity: annuity that guarantees that a specific sum of money will be paid in the future, usually as monthly income, to an annuitant. For example, a $1000-a-month ...
Have a question or comment?
We're here to help.