During accumulation, new premium payments change the number of accumulation units.

During accumulation, new premium payments change the number of accumulation units.

• A. They change the unit value only
• B. They change both number and value of accumulation units
• C. They change the number of accumulation units
• D. They have no effect

Answer: (C)

In the accumulation phase, premiums are used to purchase accumulation units. Each premium payment buys a number of units equal to the payment amount divided by the current unit value. So when you add money, you’re increasing the total number of accumulation units held in the contract. The per-unit value, driven by the investment performance of the separate account, can go up or down, but it isn’t set by the new premium payment itself. For example, if the unit value is $10 and you contribute $5,000, you’d receive 500 new units, increasing the total count. If the fund’s performance later raises the unit value to $12, those units’ value will reflect the new price, but the premium didn’t change the unit price directly—it added more units.

In the accumulation phase, premiums are used to purchase accumulation units. Each premium payment buys a number of units equal to the payment amount divided by the current unit value. So when you add money, you’re increasing the total number of accumulation units held in the contract. The per-unit value, driven by the investment performance of the separate account, can go up or down, but it isn’t set by the new premium payment itself. For example, if the unit value is $10 and you contribute $5,000, you’d receive 500 new units, increasing the total count. If the fund’s performance later raises the unit value to $12, those units’ value will reflect the new price, but the premium didn’t change the unit price directly—it added more units.