All annuities have death benefits. The IRS premature distribution tax is waived in the case of death for all annuities. In most states, the death benefit cannot be less than the cash surrender value at the owner's death. In market-based variable annuities, however, the contract owner (not the insurer) carries the investment risk, so the death benefit could conceivably be less than the owner's investment.

• If an owner/annuitant dies before annuity payments begin, variable annuity contracts will pay the named beneficiary the greater of the investment in the contract (less any withdrawals) or the contract value on the date of death. However, as noted, the death benefit will be at least equal to the cash surrender benefit.
• To provide additional buying incentives, an optional Guaranteed Minimum Death Benefit Rider (GMDBR) is available on some variable annuities, which allows owners to choose a "stepped-up" death benefit. Also known as an enhanced death benefit option, this can provide a higher death benefit than the base minimum benefits automatically provided in the annuity contract. The purpose of a stepped-up death benefit is to "lock in" investment performance and prevent a decline in the contract's account value. There is an additional annual contract charge for enhanced death benefit riders.