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
State law that stipulates that the worth of separate accounts must be valued at current market with the exception of those separate accounts established and maintained for guaranteed ...
Property damage resulting from aircraft traveling faster than the speed of sound. Although the vibrations caused by such high speed can cause damage, it is excluded on most property forms. ...
Agreement that eliminates tariffs among the United States, Canada, and Mexico over a 15-year period. Approximately 65% of United States agricultural and industrial exports would be eligible ...
Written contract between an insured and an insurance company stating the obligations and responsibilities of each party. ...
Describing automobile accidents that are considered to be the results of the negligent acts of the insured driver and are included in the driving record of that insured. ...
Benefits provided to and obtained by those insured, while still alive. They include the annuity, cash surrender value, disability income, policy loan, and waiver of premium (WP). ...
Insurance for which (1) an application has been filed but the first premium has not yet been paid or (2) a life insurance policy that has not yet been delivered to an insured. ...
Additional amount of surplus generated by an additional amount of capital to be included in the surplus above that required by the statutory requirements. This additional surplus is ...
Bond derivatives of short-term duration whose principal or coupon value is determined by a market index. Market indexes that can be utilized include securities, commodity prices, and ...
Have a question or comment?
We're here to help.