Equity-indexed annuity: What you need to know about it

An equity-indexed annuity is a special agreement you enter into with an insurance company which allows you to pay either in a lump sum or through a series of payments for your savings to accumulate. In return, the insurance company gives you a minimum return of your savings based on any change in an equity index. After the accumulation period, you will begin receiving regular payments as stipulated in the contract. The amount of return may vary and just like your choices in the accumulation phase, you can opt to receive the payments in lump sum or distributed evenly on periodic payments like monthly.

An equity-indexed annuity has become so popular these days. In fact, is has made a hit as one of the hottest insurance products in the market. What makes this product appealing is that it offers you an investment dangling with attractive returns, however the equity-indexed annuity is a little bit complicated so it is recommended that you get all the information you can lay your hands on and familiarize yourself with how it works. Shop around for the best deals and information before you shell out money to buy it. Making a rash decision may result to you paying out more than you should have.

There are several factors used to compute the interest rate of an equity-indexed annuity. Among the factors are the participation rates, interest rate cap, administrative/margin free, annual reset, the indexing method, and others.

Get hold of as many brochures as you can and compare prices and features different insurance companies provide before you make your choice. Get to know if you stand as the loser if you decide to purchase an equity-indexed annuity. One thing you must take note of is that if you cancel your equity-indexed annuity earlier that what is in your contract, you can lose money because you may be penalized with charges and taxes. You will also ruin your record with the insurance company. With equity-indexed annuity, you have access to combined features like the usual insurance produces as well as traditional securities.

If you have a problem with an equity-indexed annuity, you should contact your state insurance commissioner immediately. Do not waste time because your insurance company would be willing to help you. You can browse through the internet for helpline or get in touch with the Securities and Exchange Commission office nearest you. Again, don't be overwhelmed by the first insurance company agent who comes knocking on your door to sell you equity-indexed annuity. Don't hesitate to ask questions or make email inquiries if you're confused about anything or if you need more clarification because your wise decision could help you avoid problems in the future.