Annuity Death Benifit Too Low

[Mesha]

What is the name of your state? Pennsylvania

My father has a Variable Annuity contract with Pru. The Death benifit is much lower than the Contract Fund Value. I assume this is a fee, and if it is a fee is it waived upon my fathers death? In other words, will the benifactor (me)recieve the full contract fund face value or the reduced amount. The reduced amount is many thousands lower than the Contract value. My father lives in New Jersey, I live in Pennsylvania if this helps. My father and I are thinking of cashing the annuity for a mutual fund or other investment. We have contacted Pru who is stalling us for over a week to answer this simple question.

 

[anteater]

You probably need to some general reading on variable annuties and also get your hands on your father's contract and read that closely.

Basically, variable annuity contracts are an investment that also provide a form of risk management, that is, insurance. The premiums paid are placed in investment subaccounts that resemble mutual funds. The subaccounts can be in equities, bonds, etc. Therefore, the value of the investment subaccounts can increase and decrease with stock and bond market performance.

The insurance part comes in because the contract usually provides for some guaranteed minimum death benefit. In some contracts, this might only be the amount of the premiums paid. In other contracts, that guaranteed minimum death benefit might be stepped up to the value of the investments, sometimes on an annual anniversary, sometimes monthly. Some contracts might guarantee a certain annual percentage increase in the death benefit. They can vary widely.

If your father dies, the beneficiaries would receive the greater of the contract value at his death or the guaranteed minimum death benefit.

If this is a non-qualified annuity and you surrender it to invest the money in plain old mutual funds or stocks or bonds or a bank savings account, you will have a taxable event. Keep that in mind.

 

[Mesha]

Did some more research - Thanks Anteater

AntEater Thanks - I took your advise and read the contract and spoke to a knowledgable rep at PRU. This annuity contract was set to a 6yr anniversary
and the rep told me that upon my father's death the annuity would pay the higher of the value. The death benifit was a garantee of amount. Thanks for your help.