
 EquityIndexed Annuities Explained An equityindexed annuity is an annuity that earns interest that is linked to a stock or other equity index. One of the most commonly used indices is the Standard & Poor's 500 Composite Stock Price Index (the S&P 500). HOW ARE THEY DIFFERENT FROM OTHER FIXED ANNUITIES? An equityindexed annuity is different from other fixed annuities because of the way it credits interest to your annuity's value. Most fixed annuities only credit interest calculated at a rate set in the contract. Equityindexed annuities credit interest using a formula based on changes in the index to which the annuity is linked. The formula decides how the additional interest, if any, is calculated and credited. How much additional interest you get and when you get it depends on the features of your particular annuity.
Your equityindexed annuity, like other fixed annuities, also promises to pay a minimum interest rate. The rate that will be applied will not be less than this minimum guaranteed rate even if the indexlinked interest rate is lower. The value of your annuity also will not drop below a guaranteed minimum. For example, many single premium annuity contracts guarantee the minimum value will never be less than 90 percent (100 percent in some contracts) of the premium paid, plus at least 3% in annual interest (less any partial withdrawals). The insurance company will adjust the value of the annuity at the end of each term to reflect any index increases.
WHAT ARE SOME OF THE CONTRACT FEATURES? Two features that have the greatest effect on the amount of additional interest that may be credited to an equityindexed annuity are the indexing method and the participation rate. It is important to understand the features and how they work together. The following describes some other equityindexed annuity features that affect the indexlinked formula. Indexing Method Participation Rate Cap Rate or Cap Floor on Equity IndexLinked Interest Averaging Margin/Spread/Administrative Fee HOW DO THE COMMON INDEXING METHODS DIFFER? Annual Reset HighWater Mark PointtoPoint WHAT ARE SOME OF THE ADVANTAGES AND DISADVANTAGES OF DIFFERENT INDEXING METHODS? Generally, annuities offer preset combinations of indexing features. You may have to make tradeoffs to get features you want in an annuity. This means the annuity you choose may also have some features you don't want.
WHAT IS THE IMPACT OF SOME OTHER PRODUCT FEATURES? Cap on Interest Earned Averaging Participation Rate HOW DO I KNOW WHICH EQUITYINDEXED ANNUITY IS BEST FOR ME? As with any other insurance product, you must carefully consider your own personal situation and how you feel about the choices available. No single annuity design may have all the features you want. It is important to understand the features and tradeoffs available so you can choose the annuity that is right for you. Keep in mind that it may be misleading to compare one annuity to another unless you compare all the other features of each annuity. You must decide for yourself what combination of features makes the most sense for you. Also, remember that it is not possible to predict the future market behavior of an index. To speak with a live, licensed
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