What is the Assumed Interest Rate (AIR) in relation to separate accounts in a variable annuity?

What is the Assumed Interest Rate (AIR) in relation to separate accounts in a variable annuity?

• A. A fixed rate of return guaranteed by the insurer
• B. A hypothetical rate used for illustration
• C. An arbitrary rate of return set by the insurer for any separate account they establish
• D. The actual realized rate of return in the account

Answer: (C)

The Assumed Interest Rate is the rate used to illustrate how a variable annuity’s separate account might grow. It’s not guaranteed and not the actual return you’ll earn. Insurers pick an AIR for each separate account they establish, and that rate is used to project or illustrate future values. Because it’s chosen by the insurer for each account and used only for illustration, it’s best described as an arbitrary rate set by the insurer for the separate accounts they offer. This helps show potential outcomes, but actual results will depend on market performance.

The Assumed Interest Rate is the rate used to illustrate how a variable annuity’s separate account might grow. It’s not guaranteed and not the actual return you’ll earn. Insurers pick an AIR for each separate account they establish, and that rate is used to project or illustrate future values. Because it’s chosen by the insurer for each account and used only for illustration, it’s best described as an arbitrary rate set by the insurer for the separate accounts they offer. This helps show potential outcomes, but actual results will depend on market performance.