A:

In the separate account of a variable annuity, which of the following characteristics apply to annuity units, but not accumulation units?
I. Fixed number of units
II. Actuarial factors have been applied
III. Variable number of units
IV. Loss of control by investor
a) III, IV
b) I, II, IV
c) I, II
d) II, III, IV



The correct answer is b.
When the holder of a variable annuity contract annuitizes the contract, he/she is asking that the insurance company pay him/her for life. The company applies the actuarial factors for life expectancy and payout option to the value of the account and computes a fixed number of units to be cashed in each month. At the point of annuitization, the annuitant relinquishes all control of the account.



RELATED FAQS
  1. Which of the following are major differences between accumulation units and annuity ...

    The correct answer is d. All of these are differences between accumulation and annuity units. In addition, there are a fixed ... Read Answer >>
  2. Under the Uniform Securities Act, which of the following are defined as securities ...

    The correct answer is a. Fixed annuities are not considered securities, since the purchaser bears no investment risk. However, ... Read Answer >>
  3. What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ... Read Answer >>
  4. How liquid are variable annuities?

    Understand whether variable annuities are liquid. Learn more about the two types of variable annuities and which is more ... Read Answer >>
Related Articles
  1. Retirement

    Explaining Types Of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  2. Retirement

    Buying Annuities in a Low Interest Rate World

    Learn if buying an annuity makes sense in a low interest rate environment. Also discover the different types of annuities and how interest rates affect them.
  3. Retirement

    How a Variable Annuity Works After Retirement

    These investments can provide extra income after you retire. Here’s a guide to when and how you will receive the payout.
  4. Financial Advisor

    Annuities and Baby Boomers: The Pros and Cons

    The pros and cons of annuities that Baby Boomers seeking retirement income need to know.
  5. Financial Advisor

    An Annuity Lowdown for Investors and Advisors

    Knowing how annuities work starts with an explanation of what each part is. Here is a list of terms that cover the basic aspects of annuities.
  6. Financial Advisor

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  7. Financial Advisor

    Is Annuitization Your Best Strategy?

    Annuitization has traditionally offered annuity owners a stream of income they cannot outlive, but there are some disadvantages to this form of payout. Consider alternatives, such as income-benefit ...
  8. Retirement

    How Are Variable Annuities Taxed?

    Before investing in a variable annuity, discuss your personal financial picture with a knowledgeable financial advisor.
  9. Financial Advisor

    Variable Annuities: The Pros and Cons

    Variable annuities are one of the most complicated financial instruments. Here is an in depth look at their pros and cons.
RELATED TERMS
  1. Mortality And Expense Risk Charge

    A variable annuity fee included in certain annuity or insurance ...
  2. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
  3. Whole Life Annuity Due

    A financial product sold by insurance companies that requires ...
  4. Contingent Annuitant

    Someone designated by an annuitant to receive the annuitant’s ...
  5. Income Annuity

    Annuities designed to start paying income as soon as the policy ...
  6. Variable Annuitization

    An annuity option in which the amount of income payments received ...
Hot Definitions
  1. Leverage

    1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. ...
  2. Trumponomics

    Trumponomics is a term for the economic policies of President Donald Trump.
  3. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  4. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
  5. Smart Home

    A convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world ...
  6. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
Trading Center