equity-indexed annuity

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Equity-Indexed Annuity

An annuity with an interest rate linked to the performance of an equity index. Most annuities pay the interest rate stated in the contract, but an equity-indexed annuity pays a minimum interest rate, with the possibility of a higher rate depending on the performance of the relevant stock or equity index. Each plan uses a different methodology in determining how the higher interest rate is calculated. Common features in its calculation include a participation rate, which determines how much of the annuity is linked to the index, and the rate cap, which sets a maximum interest rate on some plans. Many equity-index annuities use the Standard & Poor's 500 Composite Stock Price Index (S&P 500) as their benchmark.

equity-indexed annuity

A contract with an insurance company that promises periodic payments keyed in a specified manner to a stock market index. Unlike variable annuities, equity-indexed annuities specify a guaranteed minimum return that is typically 3%. These contracts may also specify an upper limit (cap) on the return that is paid. Indexing methods vary, and surrender charges often apply to early withdrawals.
References in periodicals archive ?
I'll still accomplish this by showing my clients all three kinds of annuities: traditional fixed rate, variable, and the newest version of an equity index annuity called BPA.
The industry has taken the initiative to rename the product as a "fixed index annuity" (FIA) in lieu of equity index annuity (EIA), its original name.
Equity Index Annuity Sales Sales zoomed ahead by more than 80% in 2002, reaching nearly $12 billion, about $5.
In response to this dilemma, the insurance industry has created the Equity Index Annuity (EIA) that allows the investor to share in market increases as the market rises, but avoids the possibility that the investor will suffer losses in a "down market" environment such as we've witnessed over the past couple of years.
WITH EQUITY INDEX ANNUITY sales surging, products proliferating, confusion reigning and regulators lurking, this may be the time for the industry to develop a common language to talk about index interest crediting.
Make no mistake about it, an Equity Index Annuity is a complex product in every sense of the word.