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
Covers all employees of a business on a blanket basis with the maximum limit of coverage applied separately to each employee guilty of a crime. ...
Prepaid legal insurance coverage plan sold on a group basis. Entitles a group member to a schedule of benefits, at a stipulated premium, for adoptions, probates, divorces, and other legal ...
Negligent acts and/or omissions, other than breach of contract, normally independent of moral obligations for which a remedy can be provided in a court of law. For example, a person injured ...
Single policy on the insured's property for: two or more different kinds of property in the same location; same kind of property in two or more locations; two or more different kinds of ...
Workers' premiums in a contributory employee benefit plan. ...
An amount usually expressed as 50% of the monthly indemnity for the total disability benefit provided by a disability income insurance policy. This amount becomes payable when the insured ...
Single premium immediate annuity purchased to fund a structured settlement. This product is purchased when the injured party (the plaintiff) wishes to have a monthly income payment for life ...
States that preclude the placement of surplus lines with particular insurance companies. ...
Procedure in which a home office interviewer (who may or may not have underwriting experience) interviews applicants on the telephone. The questions asked the applicant are automated and ...
Have a question or comment?
We're here to help.