Equity Indexed Annuities United States

The U.S. equity-indexed annuity (EIA) offers participation at some specified rate in an underlying index. A participation rate of, say, 80 percent of the specified price index means that if the index rises by 10 percent the interest credited to the policyholder will be 8 percent. The contract will offer a guaranteed minimum payment of the original premium accumulated at a fixed rate; a rate of 3 percent per year is common.

Fixed surrender values are a standard feature, with no equity linking. Other contract features vary widely by company. A form of GMAB may be offered in which the guarantee value is set by annual reset according to the participation rate.

Many features of the EIA are flexible at the insurer's option. The MERs, participation rates, and floors may all be adjusted after an initial guarantee period.

The EIAs are not as popular as VA contracts, with less than $10 billion in sales per year. EIA contracts are discussed in more detail in Chapter 13.

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Sell Your Annuity

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