State RegulationsMA specificDifficulty 1/5
What distinguishes a variable annuity from other annuity products under Massachusetts law?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Massachusetts governs variable contracts through M.G.L. c. 175, § 132F et seq.: the variable annuity invests premiums in a separate account, and both accumulated values and eventual payouts rise and fall with the account's performance. Because the insurer does not guarantee investment results, the owner — not the company — assumes the investment risk. This is the structural feature that separates variable annuities from fixed products, where the insurer's general account stands behind the promised rates.
Why the other options are wrong
- A) Statutorily frozen payouts contradict the product's nature; variability with separate account performance is the whole point under M.G.L. c. 175, § 132F et seq.
- B) Variable annuities are lawfully sold to Massachusetts residents, subject to the state's variable contract provisions and Division of Insurance rules.
- D) A variable annuity is a written insurance contract, not an informal fund; the contract documents the separate account terms and the owner's risk.
Memory hook
Variable annuity: separate account swings, owner rides the wave.