In the world of annuities, there are a number of different types. One type that is often overlooked is an annuity that pays benefits based on units rather than specific dollar amounts.
Which annuities pay benefits based on units rather than specific dollar amounts?
A contract holder’s equity in a variable annuity is measured in units, and there are two types of unit measurements: accumulation units and annuity units.
During the accumulation period, a variable annuity owner’s units are designated as accumulation units. In accordance with the premium payments made and the subsequent performance of the separate account, both the number of units and their value will vary.
When the annuity period begins, accumulation units are transformed into annuity units. The value of the annuity units will differ based on the daily performance of the separate account, and periodic benefit checks will change accordingly.