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
Employee of a state insurance department who audits statements of insurance companies to determine their continued solvency. ...
Major credit insurer of the early 20th century that merged into the London Guarantee and Accident Co. in 1931. ...
Money that is lent. In life insurance, a loan can be taken against the cash value of a life insurance policy at any time. The policyholder does not have to repay the loan until the policy ...
Coverage under the Homeowners Form-4 (HO-4) for the insured's personal property and loss of use against fire and/or lightning; vandalism and/or malicious mischief; windstorm and/or hail; ...
Tool of risk management used for risk financing by local governments. The technique is for many local governments to combine resources in order to self insure a particular line of business, ...
INSURANCE health insurance policy providing coverage for an insured's medical expenses except those that are specifically excluded. This may be the most advantageous medical expense policy ...
Interest adjusted method that measures the cost of life insurance. Named for the late distinguished actuary M. Albert Linton. This method compares a whole life policy with a combination of ...
Liability coverage mandated by the employee retirement income security act OF 1974 (erisa) under which employers are required to purchase insurance to cover their contingent liability for ...
Insurance for accountants covering liability lawsuits arising from their professional activities. For example, an investor bases a buying decision on the balance sheet of a company's annual ...
Have a question or comment?
We're here to help.