Insurance companies have introduced products that
credit interest based on a stock market like environment but with no risk to
principal. If it is a market up year interest is credited and locked in, if a
down year no interest is credited, past gains are protected and the crediting
index resets at current market level.
The products are "equity-indexed" fixed
annuities, not mutual funds. In fact, they aren't defined as securities, but
rather as insurance policies.
The concept behind indexed annuities is fairly
simple. The insurance company guarantees your principal won't drop even if the
stock market does. But if prices rise, the insurer shares some of the profits
with you.
There are other benefits associated with fixed
annuities, such as tax-deferred compounding, penalty-free withdrawals, nursing
home waivers, a minimum guarantee of earnings. Tax penalties and surrender
charges for premature withdrawals might apply. Choose a term from 1 - 16
years.
Fixed
Annuity
Experts
