Index Annuity

WHAT ARE EQUITY-INDEXED ANNUITIES?

An equity-indexed annuity is a fixed annuity, either immediate or deferred, that earns interest or provides benefits that are linked to an external equity reference or an equity index.  The value of the index might be tied to a stock or other equity index. The value of any index varies from day to day and is not predictable.

When you buy an equity-indexed annuity you own an insurance contract.  You are not buying shares of any stock or index.

HOW ARE THEY DIFFERENT FROM OTHER FIXED ANNUITIES?

An indexed annuity is different from other fixed annuities because of the way it credits interest to your annuity's value.  Some fixed annuities only credit interest calculated at a rate set in the contract.  Other fixed annuities also credit interest at rates set form time to time by the insurance company.  Equity-indexed annuities credit interest using a formula based on changes in the index to which the annuity is linked.  The formula decides how the additional interest, if any is calculated and credited.  How much additional interest you get and when you get it depends on the features of your particular annuity.

Your equity-indexed annuity, like other fixed annuities, also promises to pay a minimum interest rate.  The rate that will be applied will not be less than this minimum guaranteed rate even if the index-linked interest rate is lower.  The value of your annuity also will not drop below a guaranteed minimum.  For example, many single premium contracts guarantee the minimum value will never be less than 90 percent of the premium paid, plus at least 3%  in annual interest (less any partial withdrawals). The guaranteed value is the minimum amount available during a term of withdrawals, as well as for some annuitizations (see "Annuity Income Payments") and death benefits.  The insurance company will adjust the value of the annuity at the end of each term to reflect any index increases.