What are features of indexed annuity products?

Indexed annuities—also known as “equity-indexed annuities” or “fixed-indexed annuities”—are complex financial instruments that have characteristics of both fixed and variable annuities. Indexed annuities offer a minimum guaranteed interest rate combined with an interest rate linked to a market index, hence the name.

What are the three characteristics of an annuity?

Annuities come in three main varieties: Fixed, variable, and indexed. Each type has its own level of risk and payout potential. For any of these, it is often structured as a deferred annuity.

What is true about equity-indexed annuities?

Indexed equity annuities offer a participation rate that can limit the extent to which the annuity owner can participate in market gains. Investors receive protection against downside risk in exchange for limited profits, breaking even each year a down market occurs.

Which of the following statements best describes an equity-indexed annuity?

Which of the following best describes equity indexed annuities? Equity indexed annuities are fixed annuities with a guaranteed minimum interest rate, and a current interest rate that is tied to the S&P 500 index.

Which is not a characteristic of a fixed annuity?

Fixed annuities are characterized by all of the following, EXCEPT: The interest rate at which premium payments grow interest during the accumulation phase is not fixed.

What is considered to be a characteristic of an immediate annuity?

What is considered to be a characteristic of an immediate annuity? “Benefit payments start within one payment period of purchase“. An immediate annuity is designed to make its first benefit payment to the annuitant at one payment interval from the date of purchase.

What is annuity insurance and its characteristics?

An annuity is a financial instrument issued and backed by an insurance company that provides guaranteed monthly income payments for the life of the contract, regardless of market conditions.

What is the primary feature of annuity?

Guaranteed1 income: Annuity plans offer a guaranteed1 income after you retire. This is a fixed amount that ensures a steady flow of funds as per your initial investments. Hence, you never run out of funds during your retirement years.

What is the basic function of an annuity?

An annuity is a long-term insurance product that provides guaranteed income. Annuities are a common source of retirement income because they provide a steady stream of payments at regular intervals and because their earnings grow tax-deferred1 until you withdraw funds.

What are the classification of annuities?

There are four basic types of annuities to meet your needs: immediate fixed, immediate variable, deferred fixed, and deferred variable annuities. These four types are based on two primary factors: when you want to start receiving payments and how you would like your annuity to grow.

How does an equity indexed annuity work?

An equity-indexed annuity is a fixed annuity where the rate of interest is linked to the returns of an index, such as the S&P 500. The rate of growth of the contract is typically set annually by the insurance company issuing and guaranteeing the contract.

How does an indexed annuity work?

An indexed annuity pays a rate of interest based on a particular market index, such as the S&P 500. Indexed annuities give buyers an opportunity to benefit when the financial markets perform well, unlike fixed annuities, which pay a set interest rate regardless.

What are the three basic phases in the life of an annuity?

Annuities follow similar basic paths, from accumulation to annuitization to payout.

What is the greatest disadvantage of an equity-indexed annuity?

They’re complex: Equity-indexed annuities are very complicated investment vehicles, and they come in a wide variety of forms. Their complexity makes them extremely difficult for investors to understand, and marketing pitches can often be deceiving.

Which benefit can be found in an equity-indexed annuity?

Indexed annuities are designed to provide a conservative retirement income option with several benefits, including protection from loss, guaranteed minimum returns and deferred tax payments. But they have their drawbacks, including complex contract agreements and lower returns than other investment options.