Some variable annuities also feature an automatic asset allocation feature. The annuity's fund managers will reallocate your assets among different investment classes as economic factors or major market trends dictate. Many variable annuities also have a fixed subaccount offering principal and interest guarantees from the issuing insurance company. If you die before your annuity payments begin, your heirs are guaranteed by the issuing insurance company to receive at least your original investment less withdrawals upon your death. This means even if the market value is down, your heirs are protected.
Some insurance companies offer some type of escalated value for the death benefit.
These escalated values may include an annual step-up to the new contract anniversary value or percentage increase on the premiums paid into the contract less withdrawals. The insurance company invests in fixed-income securities, such as corporate or government bonds . After the initial rate period, the company will offer a new interest rate for a specified number of years. While your money accumulates, the company issuing your contract guarantees your interest and principal against loss. The main advantage of a fixed annuity is that you lock in a stated, competitive rate for a specified period as your money grows without current taxes.