Equity Indexed Annuity

When an annuity’s capital appreciation potential is tied to the performance of an index, it is referred to as an equity indexed annuity (EIA). Equity annuities are also commonly referred to as fixed index annuities (FIA) or simply indexed annuities (IA). Generally, the annuity’s losses are limited while a portion of its gains are tied to the individual equity index’s returns. Some common indexes include the S&P, DIJA and the NASDAQ. With an equity indexed annuity: 1) the money can go in as a single premium payment or a series of payments; 2) the money is invested at a variable rate although there is a guaranteed minimum rate of return that provides a floor, and; 3) payments begin at a future date and are at a fixed rate that is based on market performance and is supported by the guaranteed minimum rate.