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	18
Important EIA Fact	19
Index Crediting	21
Participation Rates	22
Averaging	23
Caps	24
Spreads, Margins and Administration Fees	24
Returns	24
Back-testing	25
Indexing Formulas	26
Annual Reset Indexing Method	27
High Water Mark Indexing Method	27
Point-to-Point Indexing Method	28
Multiple EIAs with Diversified Indexing Methods	29
Withdrawing Annuity Funds	30
Payout Options	30
Example	30
Nonhuman Payees Under a Settlement Option	31
Lifetime Income Payout Option	32
Life Annuity, Period Certain Payout Option	32
Joint-and-Last-Survivor Payout Option	33
Required Distribution	33
Financially Sound Insurers	34
Rating Companies	35
A.M. Best Company	35
Demotech, Inc.	36
Fitch, Inc.	36
Moody’s Investor Service	37
S&P Global	38
Weiss Ratings	38
The History of Weiss Ratings	39
Rating Methods	41
Is the Product Suitable?	41
Questions to ask	42
Suitability Issues	44
It is Not a Liquidity Issue But Rather a Suitability Issue	46
A Comprehensive Financial Plan	47
Example	48
“Laddering” investments	48
Tax Deferred Status	51
Tax-Deferral Exception	52
Exchanges	53
Annuity Gifts	53
Other Tax Issues	54
Annuities are (Sometimes) Protected Assets	54
Probate	56
Sometimes an Annuity is a Bad Idea	56
Age	57
Surrender Penalties	57
Grasping Fundamental Aspects of the Product	58
Terminology for a Complex Product	60
General Contract Provisions	63
Entire Contract	63
Changes and/or Waivers	63
Misstatements	64
Required Reporting	64
State Law	65
Claims of Creditors	65
Other Contract Items	65
Additional Payments	66
Surrender Values and Penalties	66

United Insurance Educators, Inc.

PO Box 1030

Eatonville, WA  98328

www.UIECE.com

Email: mail@uiece.com

Phone: (253) 846-1155