Subaccounts are best described as which of the following?

Subaccounts are best described as which of the following?

• A. The insurer's general account
• B. A separate bank account
• C. An investment portfolio within the separate account, available to direct investments
• D. A fixed annuity rider

Answer: (C)

Subaccounts are the investment options inside a variable annuity’s separate account. They function like individual investment portfolios that the contract owner can direct premiums into and choose how to allocate funds among. This is what drives the growth (or loss) of the variable portion of the contract’s cash value. They are not the insurer’s general account (which is used for guarantees on fixed products), not a separate bank account, and not a fixed annuity rider. The correct description—an investment portfolio within the separate account available to direct investments—captures their purpose and placement within the contract.

Subaccounts are the investment options inside a variable annuity’s separate account. They function like individual investment portfolios that the contract owner can direct premiums into and choose how to allocate funds among. This is what drives the growth (or loss) of the variable portion of the contract’s cash value. They are not the insurer’s general account (which is used for guarantees on fixed products), not a separate bank account, and not a fixed annuity rider. The correct description—an investment portfolio within the separate account available to direct investments—captures their purpose and placement within the contract.