Index Annuities

What are Index Annuities?

Also called an equity-indexed annuity (EIA), an index annuity is a contract with an insurance company to receive periodic payments, in exchange for payments or premiums paid up-front. The element that distinguishes index annuities from other types of annuities is the link to a securities market index, such as the S&P 500. If the index goes up, the interest rate of the annuity goes up. If the index goes down, so does the interest rate earned by the annuity. Most index annuities have provisions which limit such losses, often guaranteeing a certain minimum return.

The participation rate of an index annuity is a measure of how much impact changes in the index have on the value of the annuity (in other words, how much that annuity is “in the market”). This may also be expressed as a spread, the difference between the increase in the index and the increase in the annuity’s interest rate.

Index annuities have enjoyed growing popularity, with sales exceeding $23 billion in 2004. Like other annuities, index annuities pay high commissions on sales, creating an incentive for very aggressive sales tactics.

Issues With Index Annuities

Index annuities are not intrinsically fraudulent investments, and may be suitable for some investors. Issues arise when they are sold to investors without regard to whether the investment is suitable for the investor. Index annuities, like other annuities, generally carry stiff penalties (“surrender fees”) for early withdrawal of funds, making them unsuitable investments for people who know they will need to access their money within a short period of time.

Other issues arise regarding how index annuities are sold. They are sometimes touted as “investments without risk,” or a way to invest in the stock market without the risk of losing money. These claims are not true, particularly for investors who need to withdraw money before the maturity date. And the vast majority of index annuities are sold not by stockbrokers or financial advisers, but insurance agents, who are not bound by the same regulations imposed on sellers of securities.

Client Reviews
"I am going to miss conversations with you, Sam Edwards. You’ve been a wonderful lawyer and a friend. I loved learning legal jargon from you. But, even more, it is your self-respect and commitment to your position that I admire and your persistent patience-your equanimity. With great appreciation, thank you!" M.B.
"My experience with Ryan Cook has been very positive. Through every step of the litigation he explained what to expect to happen. When I spoke with him later he reviewed the process. He was very patient, and I never felt rushed. I have already told friends how wonderful he is." L.R.
"I want you to know that I very much appreciate your expertise, hard work, and guidance that led to a satisfactory resolution with Raymond James. From our first meeting, I felt "heard" and that my situation and story were respected. Every subsequent interaction I had with any of you - in person, via email, or by phone - only corroborated that feeling. What great work you do on behalf of people like me who have been wronged, yet don't know how to navigate the appeals/mediation/arbitration process as you do. I will be forever grateful." M.L.
"Good positive experience. Guided us through a difficult process and was pleased with the outcome. Everyone I dealt with was exceptional." A.G.
"Good intelligent attorneys who never miss a beat. I set my expectations high, and they delivered above and beyond. Do not miss the opportunity to let SSEK represent you. Top-notch, efficient and effective firm." S.M.
Contact Us
  1. 1 Free Consultation
  2. 2 No Recovery, No Fee
  3. 3 Over 100 Years Experience

Fill out the contact form or call us at (800) 259-9010 to schedule your free consultation.