Variable Annuities
The mortality risk assumed by an insurance company in a variable annuity contract refers to the risk that:
Mortality risk to insurer = annuitant living LONGER than expected (more payouts).
Complete Analysis & Legal Rationale
Mortality risk for the insurance company is the risk that the annuitant lives longer than actuarially expected. During the annuity phase, the company must continue making payments as long as the annuitant lives, so longevity increases the company's liability.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Death during accumulation typically means the company pays a death benefit, but this is not the primary mortality risk.
Matches the verified teaching point in the explanation.
Investment risk is separate from mortality risk in variable annuities.
Interest rate risk affects bond values, not mortality assumptions.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.