What is a death benefit in a fixed deferred annuity?

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A death benefit is money the insurance company may pay to your beneficiary if you die before income payments start. In deferred annuities, the amount is commonly based on the contract value, the premiums paid, or under newer NAIC language, usually the greater of the annuity account value or the minimum guaranteed surrender value. During the accumulation period, many deferred annuities provide a basic death benefit for your survivors, who are called beneficiaries. The 2007 NAIC guide says that in some annuity contracts, the company may pay a death benefit if you die before income payments begin, and that the most common death benefit is the contract value or the premiums paid, whichever is more. The 2022 NAIC guide explains this similarly by saying a deferred annuity with a basic death benefit pays some or all of the annuity’s value to beneficiaries, either in one payment or multiple payments over time, and that the amount is usually the greater of the annuity account value or the minimum guaranteed surrender value. What your beneficiaries receive can depend on when you die and the terms of the contract. If you die during the accumulation period, a basic death benefit may be payable. If you die after you begin receiving income payments, your survivors may not receive anything unless the annuity guarantees to pay out at least as much as you paid into it, or you chose a payout option that continues payments after your death. Some annuities may also offer enhanced death benefits for an extra cost. The 2022 NAIC guide says these can increase the value of the basic death benefit. Because annuity terms can vary, it is important to read the contract and disclosure carefully and ask how the death benefit is set and whether it can change.