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Accumulation Unit Meaning & Definition

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Definition of Accumulation Unit

Accumulation Unit is a measure used to determine the annuitant’s proportional ownership interest in the insurance company’s separate account during the accumulation stage. During the accumulation stage, the number of accumulation units owned by the annuitant changes and their value varies.

Applying "Accumulation Unit" to Securities Exams:

When an annuitant is making contributions to an annuity contract the money is placed in the separate account and is used to purchase accumulation units. The number of accumulation units multiplied by the price of the unit determines the value of the annuitant’s account. When the accumulation unit makes a distribution of growth to the annuity contract holders, that distribution is used to purchase additional accumulation units. During the accumulation stage the growth and the distributions are tax deferred.

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