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.