The insured in a variable annuity, names one or more beneficiaries. A death benefit is the sum that these beneficiaries will receive when the insured dies, subject to the terms of the contract. Depending on the terms and conditions of the contract, the benefit can provide the beneficiaries a guaranteed minimum upon the insured’s death.

Death benefits are usually of three general types. For all these types of death benefits, the proceeds bypass probate for the named beneficiaries.
⁕ Return of account value – in return of account value death benefits, the beneficiaries receive the current contract value.
⁕ Return of premium – return of premium death benefits provides the greater of (1) an amount equal to everything paid for the annuity, minus withdrawals; or (2) the current contract value. A return of premium death benefit is sometimes the standard death benefit in a contract, though it is often a rider that is optional and available for an additional charge.
⁕ Enhanced death benefit – many enhanced death benefits pay the higher of the contract value at death or the highest contract anniversary value since the purchase of the annuity.

If withdrawals are taken from the variable annuity, then the death benefit will be reduced accordingly. If the insured’s spouse is the beneficiary of the annuity, some contracts allow the spouse to become the new owner of the contract while still receiving a death benefit. There is generally no death benefit payable once an annuity has been annuitized.