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Variable Annuity Rates and Returns

A variable annuity is a type of insurance contract that offers a combination of guaranteed minimum returns and potential for higher earnings based on investment performance. Unlike fixed annuities, which provide a set interest rate over the term of the contract, variable annuities allow policyholders to participate in the growth or decline of an underlying portfolio of investments.

Variable Annuity Rate Types​

Variable annuity rates can be categorized into several types, each with its own characteristics and benefits. Some common types include:

  • Fixed Account Rates: These rates offer a minimum guaranteed interest rate for a specified period or lifetime.
  • Interest Rate Bonuses: These are additional interest credits awarded to policyholders based on the performance of the underlying investment portfolio.
  • Credit Rate Caps: This is the maximum amount of interest that can be credited to the policyholder's account within a given time frame.
  • Guaranteed Minimum Accumulation Benefits (GMAB): This feature provides a minimum guaranteed return at maturity or death, regardless of the performance of the underlying investments.

Variable Annuity Returns​

The returns on variable annuities are typically determined by the performance of the underlying investment portfolio. The value of the contract can increase or decrease based on market conditions and the strategy employed by the insurance company's investment managers. Some key factors that influence variable annuity returns include:

  • Market Volatility: Changes in economic conditions, interest rates, and other external factors can impact the performance of the underlying investments.
  • Investment Strategy: The approach taken by the insurance company to manage the portfolio can affect the overall return on investment.
  • Policyholder Contributions: Regular contributions or premium payments made by policyholders can help boost returns over time.