What is a feature of a variable annuity that differs from a fixed annuity?

The feature that distinguishes a variable annuity from a fixed annuity is the ability to allocate funds among various investment options. Variable annuities offer policyholders the flexibility to choose from a range of investment choices, such as stocks and bonds, which can affect the future value of the annuity based on the performance of these underlying investments. This potential for growth, combined with the risk associated with market fluctuations, is a key characteristic of variable annuities.

In contrast, fixed annuities provide guaranteed payments that do not fluctuate with market conditions, leading to predictable and stable income streams. Features like fixed payments over time, guaranteed returns of principal, and predictable payouts for life are inherent to fixed annuities, making them more conservative investment vehicles. These characteristics are not present in variable annuities, which inherently involve a greater level of risk and potential for higher returns, depending on the selected investment options.