Market Value Adjustment (MVA)

Understanding Your Annuity’s Market Value Adjustment (MVA)

  • The MVA comes into play only if you surrender your annuity or take a withdrawal in excess of the free amount before the end of the surrender-charge period. The MVA may have either a positive or a negative effect on your surrender/withdrawal amount. The MVA does not apply in some states. The MVA is an adjustment to the value of your annuity surrender or withdrawal amount due to the interest-rate environment at the time of your surrender/withdrawal in comparison to interest rates when you originally purchased the annuity. The MVA may increase or decrease the value of your surrender/withdrawal amount.

The Purpose of the MVA

  • An annuity is supported by long-term investments made by the issuing life insurance company. When surrenders or large withdrawals are requested by annuity owners, the company is subject to investment risk associated with the current interest-rate environment and the market value of the company’s bond portfolio. By aligning the value of your surrender/withdrawal with the current market conditions, the MVA enables the company to offset the investment risk while maintaining competitive annuity rates.

How Interest Rates Impact the MVA

  • If interest rates are higher at the time of an early surrender or excess withdrawal, the MVA is negative. An MVA adjustment will be deducted from your surrender or withdrawal amount, in addition to the surrender charge. Conversely, if interest rates are lower at the time of an early surrender or excess withdrawal, the MVA is positive, and additional value is added to your surrender/withdrawal – which may serve to offset a portion of the surrender charge.

Limits to the MVA
  • The extent to which the MVA can impact your contract value is limited. On the downside, the MVA can’t lower the cash surrender value below your guaranteed minimum value. On the upside, the MVA can’t increase your cash surrender value above your accumulation value.
Summary
  • The MVA feature allows EquiTrust to offer competitive rates on annuity offerings. As an annuity owner, you should be fully informed of the impact the MVA may have should you decide to surrender your contract before the end of the surrender-charge period, or take a withdrawal in excess of the free-withdrawal amounts; if you do neither, the MVA will have no effect on your annuity. For more information about the MVA, refer to your annuity contract or consult your EquiTrust agent.

Guarantees are subject to the claims-paying ability of EquiTrust Life Insurance Company. Neither the Company nor its agents give tax, accounting or legal advice; consult your professional advisors in these areas. Withdrawals before age 59½ may result in a 10 percent IRS penalty tax. In the event of a full surrender, charges will apply to any penalty-free amounts taken during the same contract year. Market Value Adjustment may not apply in all states.