Death Benefits Payout Exceeded Value, Says NAVA
Although the stock market generally went south from 2001 to 2003, beneficiaries of variable annuity investors received death benefits amounting to $2.8 billion more than the value of the annuities in that time. That more than made up for market losses during the period, according to the National Association for Variable Annuities.
NAVA, Reston, Va., bases its findings on a survey of its member companies, which it says represent 95% of VA carriers.
About $355 billion in VA contracts were sold between 2001 and 2003, NAVA says. Because the death benefits paid in the period often were generated from contracts sold earlier, an exact correlation between contracts sold and death benefits paid cant be made.
Still, the study emphasizes the importance of the guaranteed death benefit feature offered by VAs, NAVA says.
The basic death benefit ensures that the investors beneficiaries will receive either the purchase payment or the market value of the annuity at the time of death, whichever is greater.
Most VAs also offer enhanced death benefit guarantees that offer additional benefits, such as a rider allowing investors to lock in market gains periodically, protecting them against future market downturns, NAVA points out.
The point of VAs is that they protect beneficiaries against the insureds death while enabling the insured to take part in the stock market, says Mark Mackey, president and CEO of NAVA.
Even if a $100,000 investment in a VA declined in value by $20,000, if the investor then died, his beneficiary would still receive a death benefit payment of $100,000, Mackey points out.
