ANNUITIES
Fixed Indexed Annuities
A fixed indexed annuity is a fixed insurance contract that can credit interest based in part on the performance of an external index. Your premium is not directly invested in the index.
How Fixed Indexed Annuities Work
The insurer uses a contractual formula to determine interest credits. Caps, participation rates, spreads and different crediting methods can limit how much of an index increase is credited. Contract values are also subject to withdrawal and surrender provisions.
What to Consider Before You Choose
- Compare index-crediting methods rather than focusing only on the index name.
- Understand caps, participation rates, spreads and renewal-rate discretion.
- Review surrender periods and liquidity before committing funds.
- Distinguish guaranteed contract values from illustrated future values.
- Evaluate optional income riders and their costs separately from the base contract.
Who Often Considers FIAs
FIAs can fit someone who wants principal protection from direct market losses while accepting limits on upside in exchange for index-linked crediting potential.