How To Explain Variable Annuities? 
A tax deferred variable annuity is a security and an insurance product . Because a variable annuity is a security , potential product purchasers need to determine their risk tolerance for market losses . High tax bracket , long term investors may also benefit from the tax deferral of variable annuities . A variable annuity has a general interest rate earning account and separate sub accounts using equity and bond investments . Policy expenses are deducted from premiums , i.e. net premiums . Net premiums are then invested in the either the general account or separate sub accounts or both . Net premiums invested in the allocations in the separate sub accounts that are either credited with gains or debited with losses depending on performance . Most variable annuities are purchased in a qualified or non-qualified plan for future income . 