State RegulationsPA specificDifficulty 1/5
Where are the premiums paid into a variable annuity invested?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
A variable annuity's premiums are invested in a separate account, an investment division kept apart from the insurer's general account, as Pennsylvania's separate-account rules for variable annuities provide under 31 Pa. Code 85.21. The separate account's investment results flow directly to the contract owner, which is why the owner bears the investment risk and the benefit can vary. This segregation of assets is the structural feature that makes the product variable.
Why the other options are wrong
- A) The general account backs fixed-dollar products where the insurer bears the investment risk; a variable annuity is invested in the separate account instead.
- C) Pennsylvania regulates the separate account but does not invest premiums in a state-managed fund.
- D) Producer trust accounts have no role in holding variable annuity premiums; the money goes to the insurer's separate account.
Memory hook
Variable = separate account: your results, your risk, kept apart from the insurer's pot.