In a Variable Annuity contract, there is no guarantee of a specific rate of return to the investor. When you consider investing, you should know this.

If the investments funding the annuity perform better than expected, the annuity amount increases. If the investments funding the annuity perform worse than expected, the annuity amount decreases. The person investing in the annuity assumes the risk based on the future performance in the account. This is known as Investment Risk.

Premiums paid into a variable annuity, after deducting expenses, are applied to purchase accumulation units. The value of each accumulation unit will depend on the market value of the assets or securities in the variable annuity at that time.

The accumulation units are priced, just like a stock price and the amount of money you invest and the price of each unit will determine how many accumulation units you can buy.

When the variable annuity benefits are to be distributed, the investors total accumulation units must be converted to annuuity units so a payout process can begin. The number of annuity units will stay fixed, but the value of thema dn the payout will fluctuate.

Insurance companies must set up separate accounts for investing into variable annuity contracts. Money put into the separate account is invested in common stock and future performance of the stocks in the account will effect the value of the variable annuity and the payout value.

All stocks that are bought in the account must be registered with the Securities and Exchange Commission (SEC)

Annuity Payment Options

Life Annuity: This annuity will continue for life. When the person dies, the payments end. These annuities produce the fastest payout, but carries risk to other dependents.

Period Certain: This annuity covers the life of the person, but will carry a period (ie: 10 years) where if the person dies before that period - a family member can get the payments until the period date.

Joint and last survivor annuity: This can cover several members to get payments after the main annuity holder dies. This is slower payout, because there are other names on the account.

Variable annuity contracts must state clearly how the dollar amounts of variable elements are determined and that the amounts may increase or decrease.

There is also a 10 day period from the date the contract is signed for the investing individual to cancel the agreement.

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