Variable annuities are called 'variable' because they offer investment options that allow the policyholder to invest in a variety of underlying investment funds, such as stocks, bonds, and mutual funds. The value of these investment funds can fluctuate based on market conditions, which means that the value of the annuity can also vary over time. This is in contrast to fixed annuities, which offer a guaranteed rate of return. The variable nature of variable annuities provides the potential for higher returns but also comes with increased risk. It's important for individuals considering variable annuities to carefully evaluate their risk tolerance and investment goals before making a decision.