Overall, Loffredi says, variable annuity contract fees have remained steady, but the cost of benefits [riders], like guaranteed lifetime withdrawal benefits, has risen some 5 to 10 basis points (see the sidebar).

A study released by the Washington, D.C.-based Insured Retirement Institute with data compiled by Morningstar reported a 10.3% increase in overall new variable annuity sales-to $136.6 billion in 2010 compared with $123.9 billion in 2009. Among the latest innovations it cites in first-quarter 2011 filings:

Western & Southern Financial Group in Cincinnati, Ohio, launched a variable annuity product (called VAROOM-the Variable Annuity for Roll Over Only Money) that claims to be the first to make exchange-traded funds available as subaccount options. Previously, ETFs were only available using a fund-of-fund structure. With this product, limited to IRAs, advisors can build portfolios using exchange-traded funds from iShares and Vanguard. It's less expensive and has fewer moving parts than other variable annuities with ETFs, according to Loffredi.

Allianz Life in Minneapolis, filed for a preliminary lifetime guaranteed withdrawal benefit-not based on age, but tied to the performance of the 10-year Treasury note.

Loffredi also cites a new twist on a type of guaranteed lifetime withdrawal feature that lets a client earn a higher withdrawal amount by locking in investment gains periodically. The benefit base upon which the withdrawal benefit is calculated now may decline with each withdrawal-provided that the policyholder does not exceed an allowable threshold. "This sounds like a bad thing," Loffredi says, "but in many cases it's a good thing because when the benefit base comes down, there are lower fees."

Lincoln National of Radnor, Pa., is rolling out a fixed annuity long-term care rider that Loffredi dubs "the first of its kind." Loffredi says the product, structured as a guaranteed lifetime withdrawal benefit, provides long-term care expenses of up to 300% of what a client initially puts in. Unlike with traditional long-term care insurance, he says, clients needn't worry about premiums rising.

Judith Alexander, director of sales and marketing for Beacon Research in Evanston, Ill., says that other long-term-care-linked annuities work differently. Often, they merge two different products-an annuity and a totally separate long-term-care insurance policy.

Alexander says Lincoln National's already existing life insurance benefit, MoneyGuard, has done well because the long-term-care benefit is leveraged against the death benefit. "You can get more money to cover long-term-care needs," she says. "Having said that, those are really great options for people who have some annuities sitting around and are past the surrender charge period."

Contrary to "tax-deferred" fixed and variable annuities, "income" or "immediate annuities"-which also can be fixed or variable, generally are purchased with a lump sum to provide periodic income. Such products are becoming more liquid and are adding inflation-adjusted payouts, Alexander says. There also is a longevity benefit. "You can pick an age, let's say age 85 [to get periodic income]," she says. The deferred feature lets clients buy a lot more income per dollar, she says.

However, with variable annuities, whether to go with simplified low fees or opt for a more costly guaranteed withdrawal benefit is a question.