In a variable annuity, which statement is true regarding the account value and risk?

In a variable annuity, which statement is true regarding the account value and risk?

• A. The account value is held in a separate account, with portfolio choices by the owner, no minimum return, and investment risk borne by the owner; payments vary with performance.
• B. The insurer guarantees a minimum rate of return and fixed payments.
• C. The owner cannot choose any investment options; the insurer selects the portfolio.
• D. The payments are fixed and do not depend on market performance.

Answer: (A)

In a variable annuity, the money you invest sits in a separate account that you control within the contract, not in the insurer’s general assets. You choose the investment options inside that account, so the portfolio mix—and the level of risk you take—depends on your selections. Because these investments aren’t guaranteed by the insurer, there’s no guaranteed minimum return; the account value rises or falls with the performance of your chosen investments. Payments, after distribution or at annuitization, are not fixed—they vary based on how well the investments perform. The insurer does not promise fixed payments or a guaranteed minimum return in this structure, and you bear the investment risk.

In a variable annuity, the money you invest sits in a separate account that you control within the contract, not in the insurer’s general assets. You choose the investment options inside that account, so the portfolio mix—and the level of risk you take—depends on your selections. Because these investments aren’t guaranteed by the insurer, there’s no guaranteed minimum return; the account value rises or falls with the performance of your chosen investments. Payments, after distribution or at annuitization, are not fixed—they vary based on how well the investments perform. The insurer does not promise fixed payments or a guaranteed minimum return in this structure, and you bear the investment risk.