What are Equity Indexed Annuities?Equity indexed annuities (EIA's), which provide a minimum guaranteed interest rate and the potential for additional interest based on a percentage of the gains in a stock market index, have become a force to reckon with in the investment marketplace. In the last 3 years, over $20 billion in sales have resulted which make them a dominant factor in the investment marketplace.
Frequently Asked Questions About Annuities Online
What are the guarantees in an EIA?The guarantees offered by major, highly rated insurance companies, is 100% of your principal plus 3% compounded annually! This minimum downside result is compared to an appropriate stock market index i.e. the Standard and Poors 500 and the investor will attain the GREATER of the 3% compounded annually or up to 75% of the index, whichever is greater. Over the term of the annuity, the market value can never decrease.
Is there any initial cost or load for investing in this insurance product?No! 100% of the investor's dollar goes to work in the EIA. Salespersons are compensated by the insurance company for selling this product, not the investor.
Are there any ongoing annual management fees with the EIA?No! since there is only a published index to track (S&P 500, Dow Jones, Russell 2000 or NASDAQ), there is no management cost, whatsoever.
Are there any surrender charges in EIA's?Yes! A declining surrender charge is charged to the investor, for a period of 7-9 years, only on the amount withdrawn exceeding 10% of the market value of the account. In other words, 10% of the market value of the account can be withdrawn, annually, without penalty. However, ALL surrender penalties are removed commensurate with a terminal illness or a 60 day confinement in an accredited nursing home facility. In other words confinement to a nursing home or a terminal illness, eliminates any surrender penalties charged against the account. In these cases, 100% of the market value can be withdrawn.
Are there any other flexibilities during the term of the annuity?Yes. The investor on an annual basis can change from one index to another or select the guaranteed fixed account.
Why are EIA's superior to other annuities i.e. fixed annuities and variable annuities?
Simple! No other annuity product offers a 100% guarantee of principal with a meaningful upside if it exceeds 3% compounded annually. Since it is an insurance product, only agents with an insurance license can sell the product. The EIA cannot be sold by stockbrokers with only a securities license. Many insurance agents are reluctant to sell this annuity product in that its commission, paid by the insurance company, is much lower than other insurance products available.
Answers courtesy of Fend
Consumer Safety and Information
Buying Life Insurance and Annuities - www.mass.gov
Consumer Affairs & Business Regulation.
Suitable Annuities - insurance.oregon.gov
Suitable Annuities for Senior Citizens.
Annuity Contracts - www.insurance.ohio.gov
Life Insurance / Annuity Contract Complaint Statistics.
Consumer Tips - www.doi.idaho.gov
Consumer Tips in Purchasing Life Insurance or an Annuity.
Standards - www.insurance.arkansas.gov
Individual Annuities Standards.
Visit our Credit Card Fraud section for useful information.