How a Market Value Adjustment Works

By Charles Mungovan, Founder, licensed insurance producer · Published 2026-09-19 · Last reviewed 2026-09-19

What it is

A market value adjustment, or MVA, is a provision in some annuity contracts that changes the amount paid out when money is withdrawn above the free amount during the surrender period. The adjustment is tied to how interest rates have moved since the contract was issued. It is separate from the surrender charge, and a contract can apply both to the same withdrawal.

Why contracts include one

When an insurer issues a contract with a stated rate for a term, it generally invests to support that commitment over that period. An MVA is the mechanism that shifts part of the cost of an early exit to the contract owner rather than to the insurer and its remaining policyholders. That is also why an MVA generally applies only to early withdrawals and not to money left for the full term.

It moves in both directions

This is the part most often described incorrectly. An MVA is not automatically a penalty. In broad terms, if rates relevant to the contract have risen since issue, an early withdrawal may be adjusted downward; if those rates have fallen, the adjustment may be upward and increase the amount received. The direction, the formula, the reference rate, and any cap or floor are all defined by the individual contract, and they vary between contracts and between carriers.

How it stacks with a surrender charge

A surrender charge and an MVA are different provisions. A surrender charge is typically a stated percentage that declines over the surrender period on a published schedule, so it is knowable in advance. An MVA depends on rate movement, so it cannot be known in advance. When both apply, the amount actually received reflects both. Many contracts also guarantee that a surrender will not return less than a stated minimum value, which can limit how far an MVA reduces the payout — but that protection is contract-specific and should not be assumed.

When it may not apply

Withdrawals within the contract’s free-withdrawal amount, in many contracts.
At the end of the guarantee period or during a contract’s stated window for taking the money.
Under certain waivers, such as confinement or terminal illness, where the contract and state law provide them.
At death, in contracts that waive the adjustment for a death claim.
Under annuitization or a payout option, in some contracts.

Each of these is a contract term, not a general rule. Two contracts with similar rates can handle all of them differently.

Questions to ask

Does this contract contain a market value adjustment at all?
What rate or index does the adjustment reference?
Is there a cap or floor on how large the adjustment can be?
Is there a guaranteed minimum surrender value, and how does it interact with the MVA?
In which situations is the adjustment waived?
How does the adjustment behave in the final contract year and at maturity?
Can the carrier illustrate the effect under different rate scenarios before issue?

An MVA is not a reason to avoid a contract, and it is not a hidden trap. It is one more term that determines what the money is actually worth if plans change, and it belongs in the comparison alongside the rate and the surrender schedule.

Guarantees apply only as described in the issued contract and depend on the claims-paying ability of the issuing insurer. Annuities are not bank deposits, are not FDIC or NCUA insured, and are not guaranteed by any federal government agency.

Educational information only. This page is not individualized insurance, investment, tax, legal, or accounting advice, and it is not a recommendation to buy or replace any product.