Variable Annuity Death Benefits Pay Out $3 Billion More
Than Value of Annuities

 

Variable Annuity Contract Guarantees Protected Beneficiaries
Regardless of Market Performance

Reston, VA, [Sept. 28, 2004] – NAVA today announced that, from 2001 to 2003, variable annuity investor beneficiaries received death benefits of $2.8 billion more than the value of the annuities, making up for short-term market losses.[1]  NAVA’s findings quantify the value and underscore the importance of the guaranteed death benefit, one of several insurance features offered exclusively through variable annuities. The “basic” death benefit insures that the investor’s beneficiaries will receive the greater of either the purchase payment or the market value of the annuity at the time of death. However, the majority of variable annuity products today offer “enhanced” death benefit guarantees. The most popular enhanced death benefit feature allows investors to periodically lock-in market gains, insuring against future market downturns.

“The reality is that no one can predict his or her own mortality. Variable annuities are unique in their ability to insure against untimely death by offering investors guaranteed protection of their principal investment,” said Mark Mackey, president and CEO of NAVA. “No matter what stage of life people are in, this insurance protection gives them the confidence to stay invested in the stock market, where the highest returns have historically been.”

The following hypothetical illustration demonstrates the value of the basic death benefit: 

·        An investor invests $100,000 in a variable annuity in June 2001

·        The investor allocates monies into several different underlying investment funds

·        In June 2004, due to stock market declines, the value of the funds in the variable annuity has decreased by $20,000, to $80,000

·        The investor dies in June 2004

·        The investor’s beneficiary receives a death benefit payment of $100,000

• If that investor had invested that same $100,000 directly in a mutual fund, their heirs would have only received $80,000 at the time of death

In the above example, if the variable annuity’s underlying funds had increased in value during that same time period by $20,000, the beneficiaries would receive a death benefit payment of $120,000.

A variable annuity is a flexible, long-term retirement investment vehicle offering a combination of guaranteed lifetime income payments, other insurance benefits that protect your principal, and tax-deferred savings advantages.  They allow the individual to invest in a variety of mutual funds and provide returns based on the performance of these funds.  The fee structure of variable annuities takes into account the value of the insurance benefits, the cost of managing the underlying investments, and the administration and distribution costs of the contract.

 

About The National Association for Variable Annuities (NAVA)

NAVA is a non-profit trade association located in suburban Washington D.C.  NAVA provides a variety of services to the industry including educational forums, research and conferences aimed at furthering the development and understanding of fixed and variable annuities, income annuities and variable life insurance.  NAVA also maintains and supports an educational website for consumers at www.RetireOnYourTerms.com.