- Suppose a contract is issued with a $50,000 initial premium and death occurs after 4 years when the Accumulated Value is $63,000. The market has made some swings however, and the Accumulated value as of the 2nd contract anniversary was $66,000. Assuming there were no additional premiums or surrenders, the death benefits are as follows:
- Basic Death Benefit: $63,000
- Maximum Anniversary Death Benefit: $66,000
- Premium Accumulation Death Benefit: $60,775.31
- Earnings Addition Death Benefit: $5200 : .40*(63,000-50,000) If purchased, this will be added to the other death benefits.
Thus, here are the death benefits for the various purchase options:
| Basic Death Benefit Only: $63,000 |
| MADB only: $66,000 (greater of Basic DB and MADB) |
| PADB only: $63,000 (greater of Basic DB and PADB) |
| EADB only: $68,200 (Basic DB + EADB) |
| MADB and PADB: $66,000 (greatest of Basic DB, MADB, and PABD) |
| MADB and EADB: $71,200 (EADB + Greater of Basic DB and MADB) |
| PADB and EADB: $68,200 (EADB + Greater of Basic DB and PADB) |
| All three: $71,200 (EADB + Greatest of Basic DB, MADB, and PADB) |
- Suppose a contract is issued with a $50,000 initial premium and death occurs after 15 years when the Accumulated Value is $80,000. Assuming there were no additional premiums or surrenders, and the AV was never higher than $80,000 on a contract anniversary, the death benefits are as follows:
- Basic Death Benefit: $80,000
- Maximum Anniversary Death Benefit: $80,000
- Premium Accumulation Death Benefit: $100,000 (2 times adjusted sum of premiums as this is less than $50,000 growing at 5% for 15 years.)
- Earnings Addition Death Benefit: $12,000
Thus, here are the death benefits for the various purchase options:
| Basic Death Benefit Only: $80,000 |
| MADB only: $80,000 |
| PADB only: $100,000 |
| EADB only: $92,000 |
| MADB and PADB: $100,000 |
| MADB and EADB: $92,000 |
| PADB and EADB: $112,000 |
| All three: $112,000 |
- Suppose a contract is issued with a $50,000 initial premium and death occurs after 4 years. The market has done quite badly, and the Accumulated Value is down to $45,000. Before it plummeted however, the AV had gotten up to $52,000 at the first contract anniversary. Assuming there were no additional premiums or surrenders, the death benefits are as follows:
- Basic Death Benefit: $50,000 (adjusted sum of premiums)
- Maximum Anniversary Death Benefit: $52,000
- Premium Accumulation Death Benefit: $60,775.31
- Earnings Addition Death Benefit: 0
Thus, here are the death benefits for the various purchase options:
| Basic DB only: $50,000 |
| MADB only: $52,000 |
| PADB only: $60,775.31 |
| EADB only: $50,000 |
| MADB and PADB: $60,775.31 |
| MADB and EADB: $52,000 |
| PADB and EADB: $60,775.31 |
| All three: $60,775.31 |
- Suppose a client invests $3000 a year into a contract for five years and death occurs at the end of the fifth year when the accumulated value is $17,000. Assuming there were no other premiums or surrenders, and the AV was never higher than $17,000 on a contract anniversary, the death benefits are as follows:
- Basic Death Benefit: $17,000
- Maximum Anniversary Death Benefit: $17,000
- Premium Accumulation Death Benefit: $17,405.74
- Earnings Addition Death Benefit: $800
Thus, here are the death benefits for the various purchase options:
| Basic DB only: $17,000 |
| MADB only: $17,000 |
| PADB only: $17,405.74 |
| EADB only: $17,800 |
| MADB and PADB: $17,405.74 |
| MADB and EADB: $17,800 |
| PADB and EADB: $18,205.74 |
| All three: $18,205.74 |
- Suppose a contract is issued with a $20,000 initial premium and death occurs after 4 years. After two years the contract has increased in value to $40,000, at which point the client made a partial surrender of $2,000. The AV at the time of death was $45,000. Thus, the adjusted sum of premiums is: 20,000*(1-2000/40000)=20,000*.95= $19,000.
- Basic Death Benefit: $45,000
- Maximum Anniversary Death Benefit: $45,000
- Premium Accumulation Death Benefit: $23,094.62 = ((20000*1.05^2)*.95*1.05^2
- Earnings Addition Death Benefit: 7600 = .40 * 19,000
Thus, here are the death benefits for the various purchase options:
| Basic DB only: $45,000 |
| MADB only: $45,000 |
| PADB only: $45,000 |
| EADB only: $52,600 |
| MADB and PADB: $45,000 |
| MADB and EADB: $52,600 |
| PADB and EADB: $52,600 |
| All three: $52,600 |
All of the preceding examples are hypothetical and are intended only to illustrate how the various death benefit options function. They do not reflect the actual performance of the Flexible Premium Deferred Variable Annuity.
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