Variable annuities invest in fixed-income and equity-based accounts whose values change based on market conditions. The owner has the option of dividing money between the low-risk fixed options and higher-risk equity-based vehicles offered by the insurer.

• Equity-Based: During the accumulation phase of a deferred variable annuity, the owner decides how the annuity premiums are invested. Variable annuities allow investors easily to diversify their investments various sub-account choices, such as equity, bond, growth, growth and income, small cap, international, social awareness, and money market portfolios, allocating the annuity premiums to one or more of these sub-accounts. The value of the annuity will then fluctuate based on the investment results of the sub-accounts selected by the owner, and returns are not guaranteed.

  Because variable annuities allow investors to allocate premiums to stocks and bond funds, these contracts are considered securities and must be accompanied by a prospectus, which is registered with the Securities and Exchange Commission (SEC). In order to offer variable annuities to a client, an agent must be a Registered Representative with the National Association of Securities Dealers (NASD) and possess at least NASD series 6 & 63 licenses in addition to his or her insurance license.

• Risk-Based: Risk-based options invest in a mix of equity and/or fixed income funds, based on the individual's risk tolerance, and will generally not change as the investor nears retirement age. Risk-based options typically are appropriate for investors who prefer unchanging asset allocations.

Many variable annuities offer asset allocation assistance to help owners decide where to invest their assets based on their needs, risk temperament, and time horizons. Returns are not guaranteed. If the funding options chosen perform well, they may exceed fixed annuity returns; if not, the owner's earnings and principal may be lost. Variable annuities allow money to be transferred from one subaccount to another without triggering a taxable event, which facilitates asset allocation changes as circumstances and market conditions change.

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