Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesHard
A Florida resident is reviewing their variable annuity contract. They notice a provision that allows them to allocate their premium payments among various investment options, such as stock funds, bond funds, and money market funds. This feature is directly related to which component of a variable annuity?
- ASeparate account
- BGeneral account
- CGuaranteed minimum withdrawal benefit (GMWB)
- DFixed account
Show answer & explanationAnswer & explanation
Correct answer: A. Separate account
The separate account of a variable annuity is where the policyholder's premiums are invested in various sub-accounts (like stock, bond, or money market funds). The performance of these investments directly affects the annuity's cash value and death benefit.
Why the other options are wrong
- B. The general account is where fixed annuities invest premiums and is subject to the insurer's general assets, not for variable investment choices.
- C. A GMWB is a rider that guarantees a minimum withdrawal amount, not where investment choices are made.
- D. A fixed account might be an *option* within a variable annuity, but the overarching structure that allows for varied investment choices is the separate account.
Variable Annuity Separate Account
A segregated investment account within an insurance company that holds the assets of variable annuity contracts, allowing policyholders to choose from various underlying investment options.
- Assets are separate from insurer's general account
- Subject to market fluctuations and investment risk
- Houses sub-accounts (mutual funds)
Memory trick: Separate account, separate choices, separate risks, separate voices.