What are Equity Indexed Annuities?
Let me just briefly explain how equity indexed annuities work, before we talk about problems associated with them. An annuity is actually an insurance product which provides the annuitant with regular payouts till a fixed point in time. In case of a single life annuity and straight life annuity, an annuitant receives payment till the end of his or her life time. The interest accrued on your investment in the annuity is either fixed or variable and the annuity is either known as a fixed or variable annuity respectively. Check out this article which has fixed annuities explained, for more details. In case of equity indexed annuities the returns on the principle amount invested are linked with the performance of an equity index. There is a fixed part, known as guaranteed return that an annuitant will receive and a variable part, which depends on the how well the index (like S&P 500) performs in the stock market. The major USP of equity indexed annuities is the high rate of return that it
