Assumed Interest Rate (AIR)

Definition - What does Assumed Interest Rate (AIR) mean?

Assumed Interest Rate (AIR) is (1) A benchmark used to determine the minimum rate of return which must be realized by a variable annuity’s separate account during the pay out phase in order to keep the annuitant’s payments consistent, or,
(2) In the case of a variable life insurance policy, the minimum rate of return which must be achieved in order to maintain the policies variable death benefit.

Testopedia explains Assumed Interest Rate (AIR)

The AIR is determined by the insurance company and is the basis for the annuity check and or death benefit. For example, in the case of a variable annuity; if the customer's separate account out performs the AIR, this monthly check will be greater than the last monthly check. If the separate account under performs in relation to the AIR, this monthly check will be smaller than the last. And if the separate account performs in tandem with the AIR, this monthly check will be the same as the last monthly check.

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