Answers - Finance

One of the major reasons living benefits have grown in popularity is because they reduce investor risk. The popularity is a direct result of poor market performance. Living benefits evolved because of this market decline and have made investing easier.

As the market had its steady and

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

severe decline in the early 2000's, insurance companies came up with a novel idea: why not guarantee investors a rate of return, regardless of market performance. The GMIB is the grand daddy of the living benefits.

Other living benefits have been introduced since the first GMIB was rel

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

ased over 6 years ago. Now we have guaranteed minimum withdrawal benefits also known as GMB's, guaranteed account values known as GAV, and life-time benefits. Each one of these benefits may not be available at all insurance carriers and can go by different names. All these benefits defl

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ect the risk of investing in the stock market and puts the risk on the insurance company. Of course, the insurance companies may make a profit from the fees you pay on these benefits. Lets take a look at the different benefits.

GMIB:
The terms of the guarantees seem pretty simple,

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

you invest in the company's variable annuity for a specified number of years, typically 10 years. If the market does not perform well, the company guarantees you a minimum income stream for life, even if your account is at zero. The insurance company gives you a minimum interest rate fo

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

that 10 year period of time, usually 5 or 6%, which accumulates and is considered the "base benefit" amount. This base benefit amount is what is used to calculate the minimum stream of income that is guaranteed for the rest of your life. This benefit does require you to annuitize the c

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ontract. That means you turn in your contract for a stream of income, this option is irrevocable. The term used for this benefit is GMIB which stands for guaranteed minimum income benefit. Different companies use different terms for this benefit.

GWB:
The guaranteed withdrawal ben

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

fit was the second living benefit that hit the insurance market about 5 years ago. This benefit allows the owner of the contract to take withdrawals for a guaranteed minimum period of time. This type of benefit guarantees you your money back in the form of withdrawals. A withdrawal bene

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

fit usually allows you to take withdrawals in the amount of 6 to 12%. Typically, the benefits allow 7% on average and guarantees you that 7% for a minimum of 14.2 years, which equals 100% of your principal back. These benefits usually allow for step-ups every 3 to 5 years, and when you

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

tep-up the account value, assuming positive investment results, it restarts the 14.2 year time frame all over again. This benefit allows you to increase your income if your investments go up and guarantee your money back if you lose money in the market. Keep in mind you only get your mo

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ey back in the form of withdrawals, it is not a lump sum benefit.

GAV:
These types of benefits guarantee your money back in a lump sum form. You invest your money with a company that has this benefit and after a specified number of years the benefit will mature and you receive, at

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

a minimum, your money back. Depending on the company, you will have to hold the contract anywhere from 5 to 10 years in order to get your money back. There are many different variations to this benefit. It can either require you to invest into asset allocation funds or you give the com

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

any the authority to move money back and forth between the sub-accounts and the company's fixed account. After the required time period, if your account value is lower than your initial investment or the last stepped-up amount, if the company allows you to step-up the benefit, you will

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

get back your money in a lump sum.

For-Life Benefits:
These are the newest living benefits. This type of benefit allows you to receive a percentage, usually 4 to 6%, of your original investment for as long as you live. These benefits also allow your income to increase if you exper

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ence positive investment performance, usually every 3 or 5 years. These benefits are usually age based, so depending on your age you may be charged more if you are younger and less if you are older. You may also be able to take out a greater percentage of your original investment if you

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

are older. These benefits are pretty straight forward as long as you live the company will pay you. So if you invested $100,000 you are able to take out $5,000 per year for the rest of your life. There are many variations on this type of benefit and every company has a different name fo

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

r it. Again this is an income benefit not a lump sum benefit.

Living benefits can be a wonderful thing, but they are extremely confusing. Just by reading the descriptions above, do not assume you understand them. What I had written above is a very simplified version of the benefits. Ea

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

h benefit has pros and cons and even many of the agents or brokers selling them do not fully understand them. You have to know what you are buying and if there is a better one on the market for your needs. This is where I come in to help you. I have done the research, I have read all th

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

e materials and I have ripped them apart and rated each benefit from the top selling annuity companies. No other source out there has done what I have done and given you straight unbiased facts behind, not just living benefits, but annuities themselves. Please remember that even if an

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

nnuity ranks low it does not mean it is a bad product or benefit. It is meant to compare each contract against its peer group. Each state may have a different variation of the products presented here. Please check with each company to insure that the benefits are available in your state

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Answers - Variable Annuity Living Benefits Explained

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