The Kindur Assured Income annuity includes a “Market Value Adjustment” or “MVA” which applies to (i) any withdrawals above the penalty-free amount and (ii) surrenders occurring during the surrender charge period. To learn more about surrender charges, click here.
Generally, MVAs allow the insurance company to give you more upside potential because they are sharing risk with you. The insurance company issues an annuity contract with the understanding that you are committing to the length of the contract. The insurance company buys bonds of a certain duration based on your commitment.
When you surrender a policy early or withdraw more than the penalty free amount, this can throw off the insurance company’s pricing if there has been a change in interest rates from when the policy was issued to when the policy is surrendered. The MVA is a way for the insurance company to reconcile for this interest rate movement and adjust the surrender charge accordingly.
If interest rates were lower when the policy was issued than it is when the policy is surrendered, it will cause the MVA to be negative. When an MVA is negative, it subtracts dollars from your surrender value, meaning the surrender penalty to you is greater. If interest rates are higher when the policy was issued than it is when the policy is surrendered, it will cause the MVA to be positive. When an MVA is positive, it adds dollars into your surrender value, meaning the surrender penalty is less.