Equity Indexed Annuities

Table of Contents

 

Investment Vehicles

1

The Test of Time

2

Finding the Right Product

3

Diversification

5

Rule of 100

6

Who is Managing the Money?

6

The Annuity’s Investment Role

9

Defining the Equity Indexed Annuity (EIA)

11

Annuity Surrender Fees

15

Guaranteed Rates of Return – A Complex Issue

17

     Important EIA Fact

19

Index Crediting

20

Participation Rates

21

Averaging

23

Caps

23

Spreads, Margins and Administration Fees

24

Returns

24

    Back-testing

25

Indexing Formulas

25

Annual Reset Indexing Method

26

High Water Mark Indexing Method

27

Point-to-Point Indexing Method

28

Multiple EIAs with Diversified Indexing Methods

28

Withdrawing Annuity Funds

29

Payout Options

29

  Example

30

     Nonhuman Payees Under a Settlement Option

31

     Lifetime Income Payout Option

31

     Life Annuity, Period Certain Payout Option

32

     Joint-and-Last-Survivor Payout Option

32

     Required Distribution

33

Financially Sound Insurers

33

  A.M. Best Company

34

  Demotech, Inc.

35

  Fitch, Inc.

35

  Moody’s Investor Service

37

  Standard and Poor’s

39

  Weiss Ratings

39

Is the Product Suitable?

40

     Suitability Issues

43

It is Not a Liquidity Issue But Rather a Suitability Issue

45

A Comprehensive Financial Plan

46

  Example

47

     “Laddering” investments

47

Tax Deferred Status

50

     Tax-Deferral Exception

51

Exchanges

51

Annuity Gifts

52

Other Tax Issues

52

Annuities are (Sometimes) Protected Assets

52

Probate

54

Sometimes an Annuity is a Bad Idea

55

     Age

55

     Surrender Penalties

55

     Grasping Fundamental Aspects of the Product

56

Terminology for a Complex Product

58

General Contract Provisions

61

     Entire Contract

61

     Changes and/or Waivers

62

     Misstatements

62

     Required Reporting

62

     State Law

63

     Claims of Creditors

63

     Other Contract Items

63

Additional Payments

64

Surrender Values and Penalties

64

In Conclusion

65

 

United Insurance Educators, Inc.

8213 – 352nd Street East

Eatonville, WA  98328

 

Email: mail@uiece.com

Phone: (253)  846-1155