What describes a living benefit in a variable annuity?

• A. A living benefit provides lifetime income or enhanced withdrawals and has its own fees and guarantees.
• B. A rider that only pays on death.
• C. A feature that eliminates all fees.
• D. A feature that caps the investment earnings.

Answer: (A)

Living benefits are features attached to a variable annuity that provide income during the policyholder’s lifetime. They guarantee either a minimum level of lifetime income or an enhanced withdrawal amount, even if the account value drops. These guarantees run through a rider and have their own fees, separate from the base contract, because the insurer is assuming risk to ensure the income or withdrawal guarantees.

This differs from a rider that pays only on death, which is a death benefit rather than a living benefit. It also isn’t about eliminating fees or simply capping investment earnings—the defining idea is the lifetime income or enhanced withdrawals with guaranteed protections, for a price in the form of rider fees.