During the accumulation period, what effect do new premium payments have on accumulation units?

During the accumulation period, what effect do new premium payments have on accumulation units?

• A. They change the unit value only
• B. They decrease the number of accumulation units
• C. They do not affect the units
• D. They change the number of accumulation units

Answer: (D)

During the accumulation period, new premium payments are allocated to the separate accounts and converted into accumulation units at the current unit value. A premium buys a number of accumulation units equal to the payment amount divided by that unit value. So, when you make a new premium payment, you acquire additional accumulation units, increasing the total number of units you hold. The per-unit value itself can rise or fall with investment performance, but the immediate effect of new premiums is to add units, not to alter the value per unit.

During the accumulation period, new premium payments are allocated to the separate accounts and converted into accumulation units at the current unit value. A premium buys a number of accumulation units equal to the payment amount divided by that unit value. So, when you make a new premium payment, you acquire additional accumulation units, increasing the total number of units you hold. The per-unit value itself can rise or fall with investment performance, but the immediate effect of new premiums is to add units, not to alter the value per unit.