Market Value Adjustment
Initially, too many viewed annuity policies with a Market Value Adjustment as a disadvantage to the policyowner. In essence, a market value adjustment can “credit” excess interest or “debit” based on the interest rates at the time of surrender. For example, you purchase an annuity when interest rates are 5% and two years later everyone is paying 7% and you want to surrender your annuity to get that higher rate. You will first pay the surrender charges plus your annuity value will be debited based on the Market Value Adjustment which is described in the annuity contract. However, Market Value Adjustment policies go the other way too. If interest rates decreased from 5% to 3%, then the insurer would give you an additional credit based on the same Market Value Adjustment.

The much bigger picture is that you want the company that issues your annuity to remain strong in spite of where interest rates go and the Market Value Adjustment allows the insurer to protect themselves and the consumer in the long run. Therefore, should a consumer have all of their money in an annuity with a market value adjustment? Probably not since no one should have all of their money in one given product since diversification is so important.