Premiums paid into a variable annuity are credited as what, with accumulation units converted to annuity units at the end of the accumulation period?

Premiums paid into a variable annuity are credited as what, with accumulation units converted to annuity units at the end of the accumulation period?

• A. Accumulation Units
• B. Annuity Units
• C. Premiums
• D. Administration Charge

Answer: (A)

In the accumulation phase, premiums paid into a variable annuity are used to buy accumulation units in the separate account. The number of units you acquire depends on the premium amount and the current accumulation unit price, which changes with the performance of the underlying investments. When you move to the annuitization phase, those accumulation units are converted into annuity units at the then-current values, and the number of annuity units times the annuity unit value determines your periodic payout. Annuity units are used for the payout calculation, not for the initial credited amount, and administration charges are separate costs.

In the accumulation phase, premiums paid into a variable annuity are used to buy accumulation units in the separate account. The number of units you acquire depends on the premium amount and the current accumulation unit price, which changes with the performance of the underlying investments. When you move to the annuitization phase, those accumulation units are converted into annuity units at the then-current values, and the number of annuity units times the annuity unit value determines your periodic payout. Annuity units are used for the payout calculation, not for the initial credited amount, and administration charges are separate costs.