A life annuity is an annuity, or series of payments at fixed intervals, paid while the purchaser is alive. A life annuity is an insurance product typically sold or issued by life insurance companies. Life annuities may be sold in exchange for the immediate payment of a lump sum or a series of regular payments, prior to the onset of the annuity.

A variable annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. As opposed to a fixed annuity that offers a guaranteed interest rate and a minimum payment at annuitization, variable annuities offer investors the opportunity to generate higher rates of returns by investing in equity and bond subaccounts. If a variable annuity is annuitized for income, the income payments can vary based on the performance of the subaccounts.

Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteed rate of interest. Variable annuities allow investors to invest in a dozen or more professionally managed subaccounts consisting of various asset classes, including stocks, bonds and money market funds. This gives investors the opportunity to earn higher rates of return, which can increase the amount of capital they can accumulate and provide a variable income stream to potentially outpace inflation. However, investors assume the risk of their subaccounts not outperforming the guaranteed return of a fixed annuity, which can result in less capital accumulation and a smaller income stream.

One advantage variable annuities have over mutual funds is the guaranteed death benefit feature. Regardless of how the subaccounts perform, a variable annuity death benefit ensures the annuity owner’s beneficiaries receive no less than the initial investment. Variable annuity investors pay for the cost of that protection through a mortality charge. For an added charge, some variable annuities offer a minimum rate guarantee that pays a minimum rate of return even if the subaccounts experience a loss for the year. A similar rider is offered for income payments at the time of annuitization that guarantees a minimum payout rate regardless of the performance of the subaccounts.

www.tandfonline.com [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.journals.uchicago.edu [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.sciencedirect.com [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.tandfonline.com [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.tandfonline.com [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.sciencedirect.com [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

ieeexplore.ieee.org [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.cambridge.org [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.tandfonline.com [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

www.sciencedirect.com [PDF]

… Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely … The summary statistics of these selected variables are presented in Table 1. Regression Modeling for the Valuation of Large Variable Annuity Portfolios …

Tags:2020accountamountannuitiesannuitybenefitbenefitscashcontractcoronavirusdeathdeferredeconomiceconomicsexpensefinancefinancialfixedgroupguaranteedincomeinsuranceinterestinvestmentinvestorslifelincolnmarketmoneyofferoptionspandemicpaymentsperformanceportfolioproductsprotectionquarterrateretirementsalessavingsstocktimeuncertaintyvariableyear

A variable annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis.

Variable Annuities offer investors the opportunity to generate higher rates of returns by investing in equity and bond subaccounts.

The disadvantage is that you assume risk if your subaccounts do not outperform the guaranteed return offered by fixed annuities. This can result in less capital accumulation and smaller income streams.

One advantage is that they have guaranteed death benefit features, regardless of how the subaccounts perform.