Valuation of a Variable Annuity Contract

What this video covers

• How accumulation unit value (AUV) fluctuates with subaccount net asset value, and why accumulation units function like mutual fund shares
• The accumulation units math: number of units purchased equals payment amount divided by AUV, and contract value equals total units times current AUV
• Why surrender value is not contract value, and how contingent deferred sales charges (CDSC) and outstanding policy loans reduce the cash-out amount
• What happens at annuitization: accumulation units convert to annuity units and the decision becomes irrevocable with no surrender option
• Why annuity units fix in number for life but float in value based on performance versus the Assumed Interest Rate (AIR), causing variable payout amounts
• The side-by-side distinction between accumulation units (variable number, variable value, can add/surrender) and annuity units (fixed number, variable value, locked in)
• How to avoid confusing variable annuity payouts with fixed annuity level payments on exam day