What is the formula for calculating the nonforfeiture value of a deferred annuity when it is surrendered prior to annuitization?

Calculating the nonforfeiture value of a deferred annuity involves understanding how the accumulated value of the annuity is affected by withdrawals and surrender charges when the annuity is surrendered before it is converted into an income stream through annuitization.

The correct formula emphasizes that the surrender value represents what the annuity holder will receive if they choose to surrender the contract prior to annuitization. The surrender value effectively reflects the premiums paid, minus any amounts withdrawn and any applicable surrender charges. This is critical because the idea behind nonforfeiture values is to ensure that the consumer is not completely penalized for accessing their funds early, but they also should not receive more than they truly have accumulated.

In this formula, "Withdrawal" represents any amounts the policyholder may have taken out from the annuity before surrendering it. "Surrender Charge" is a fee that the insurance company assesses, which is deducted from the accumulated value to discourage premature surrender of the policy. The combination of these factors provides a clear picture of how much value remains for the consumer at the point of surrender.

Thus, the formula helps to ensure that the consumer receives a fair return based on their invested premiums and any withdrawals they've made, adjusted for any surrender penalties, which reflects