Principal Freedom Variable Annuity 2 review

For certain accumulation-focused buyers, yes — with caveats. The cost structure is genuinely lean for a variable annuity: 0.95% M&E, zero contract fee, and zero administration charge is competitive. The 3-year surrender period is about as short as variable annuities get, which gives this contract some real flexibility advantages. The step-up death benefit adds legitimate value for buyers who care about legacy planning.

The problem is the lack of optionality. There are no riders to add — not an income rider, not a GMAB, not a GMDB rider. For buyers who want a bare-bones accumulation vehicle with low ongoing costs and a short surrender, this may be enough. For anyone who might later want guaranteed income or additional protection layers, this contract offers no path there.

The "currently not available" state approval note is also worth flagging. Depending on when and where someone is reading this, availability may be restricted or the product may be in limited distribution.

The main reason to buy Principal Freedom VA 2 is straightforward market participation through a tax-deferred vehicle with low base costs. Someone who wants to invest in diversified subaccounts — including equity, bond, real estate, international, and target-date options — while keeping insurance costs low and avoiding a long surrender period has a real reason to consider this contract. The secondary reason is the step-up death benefit, which locks in gains at the highest anniversary value every seven years for beneficiaries.

I think Principal Freedom VA 2 is best for an accumulation-oriented buyer who is already comfortable with mutual fund-style investing, wants the tax deferral of an annuity wrapper, and is not interested in paying for living benefit riders they do not plan to use. The short surrender and low M&E make it well-suited to someone who prioritizes keeping costs down and maintaining flexibility to exit or exchange the contract within a few years.

It is less attractive for someone who wants guaranteed lifetime income, principal protection from market loss, or a more robust subaccount menu with broader manager choices. And because no riders can be added, it is not appropriate for someone whose planning needs might evolve toward income guarantees later.

You are buying tax-deferred market access with an insurance wrapper. This is not a principal-protected product. Your account value will fluctuate with the performance of the subaccounts you select, and it can go down. What the contract adds beyond a taxable brokerage account is tax deferral, the step-up death benefit, and the ability to eventually annuitize — not a floor under your money. That is an important distinction to understand clearly before buying.

Principal Freedom VA 2 allocates premiums to a menu of 24 variable subaccounts spanning large-cap equity, mid-cap, small-cap, international, real estate, fixed income, money market, and target-date options. The lineup is managed primarily by Principal Global Investors with a few external managers including Fidelity and American Century.

The M&E charge of 0.95% is deducted daily from the variable subaccount values. Net subaccount expense ratios range from 0.20% to 0.85%, so total annual costs inside the contract run roughly 1.15% to 1.80% depending on the subaccounts selected. That is a reasonable cost range for an L-share variable annuity, particularly one with no contract fee and no administration charge layered on top.

There is no fixed account option, which means all premium must go into variable subaccounts. Buyers who want a safe harbor inside the contract for a portion of their premium do not have that option here.

The step-up death benefit is the most meaningful secondary feature. It pays beneficiaries the greatest of the full account value, premiums paid less any withdrawals, or the highest account anniversary value in every 7-year look-back period. That ratchet feature means gains from strong market periods can be locked in for the estate even if the account value later declines. For buyers who are partly motivated by legacy planning, that adds real value without an extra rider charge.

The surrender charge waivers for terminal illness, disability, and hospitalization are also worth noting. These provide meaningful liquidity relief in serious situations and reduce the practical downside of committing to a 3-year surrender schedule.

This is one of the shorter surrender structures in variable annuity products. The 3-year schedule runs 3%, 2%, 1%, then 0%, which is considerably shorter than the 5-7 year windows common in many variable annuity platforms.

Free withdrawals are available immediately — the contract allows 10% of previous account anniversary premiums paid or earnings without a surrender charge. That is a generous free-withdrawal provision, particularly combined with the waivers for terminal illness, disability, and hospitalization. Taken together, the liquidity picture is one of the more flexible aspects of this product.

That said, the account value itself can decline with the market. So "liquid" here means accessible without surrender charge — it does not mean protected from loss.

The base cost structure is lean. The M&E charge of 0.95% assessed daily is the primary insurance cost, and there is no annual contract fee and no administration charge layered on top. Net subaccount expenses add another 0.20% to 0.85% depending on what you select.

There are no rider fees because there are no riders. That is a cost advantage if you do not want riders, and a hard constraint if you do.

The main tradeoffs are structural rather than fee-related. There is no fixed account. There are no optional guaranteed benefits. The subaccount count of 24 is modest compared to platforms that offer 50-100+ options. And current state availability appears restricted, which limits who can actually access this product.

Principal Freedom Variable Annuity 2 is issued by Principal Life Insurance Company, a subsidiary of Principal Financial Group. Principal carries an A+ rating from both A.M. Best and Standard and Poor's, which reflects strong financial stability. Principal Financial Group is a well-established insurance and financial services company with broad retirement and insurance operations. The carrier's financial strength is a genuine positive for this product.