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
Amount of reinsurance accepted by a second reinsurer which is in excess of the original insurer's retention limit and the first reinsurer's first surplus treaty's limit. ...
Life insurance that stays in effect for only a specified, limited period. If an insured dies within that period, the beneficiary receives the death payments. If the insured survives, the ...
Premiums paid with funds that are not borrowed from life insurance. It is important to ascertain the finance charges and the costs/benefits of such a transaction. ...
Part of the Balanced Budget Act of 1997 that permits medicare recipients to select coverage among various private health care plans to include HMOS, PPOS, POINT-of-SERVICE (POS), MEDICAL ...
Oral or written statement that results in injuring the good name or reputation of another, causing that individual to be held in disrepute. ...
Coverage for bodily injury and/or death resulting from accidental means (other than natural causes). For example, an insured is critically injured in an accident. Accident insurance can ...
Insurance company that puts together a consortium of insurance and reinsurance companies to provide an adequate financial base with sufficient underwriting capacity to insure large risks. ...
Method of payment of an insurance premium that allows an insured to regulate the amount and frequency of the premium payments in accordance with cash flow over a stipulated period of time. ...
form of BOILER AND MACHINERY INSURANCE that covers power generating plants. form of BUSINESS INCOME COVERAGE FORM that covers a utility customer's losses resulting from interruption of ...
Have a question or comment?
We're here to help.