Guaranteed Minimum Death Benefit (GMDB)
A variable annuity guarantee paying the beneficiary at least the amount invested (or a stepped-up value) even if account value has declined.
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Practice This Concept
Which statement about the death benefit of a traditional variable life insurance policy is correct?
It has a guaranteed minimum death benefit regardless of investment performance — Traditional variable life insurance invests premiums in subaccounts held in a separate account, so cash values rise and fall with investment performance. However, the policy guarantees a minimum death benefit equal to the face amount stated at issue. Investment performance can increase the cash value and drive the death benefit above the guaranteed minimum, but the benefit cannot fall below it. This floor is what distinguishes variable life from variable universal life, which does not offer the same guaranteed minimum death benefit.
National insurance concept
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