Product Changes Spur Variable Annuity Sales
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When an annuity’s capital appreciation potential is tied to the performance of an index, it is referred to as an indexed annuity (IA). Indexed annuities are also commonly referred to as equity indexed annuities (EIA) or fixed indexed annuities (FIA). 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 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.
An article on indexed annuities appeared in Bloomberg yesterday (click here to read).
The article is substantive and comes from a credible source. It is provides a good explanation of why surrender fees need to be a front-and-center consideration for any consumer considering the purchase of an...