|A New Innovation|
Could you imagine an annuity product that provides
the long term potential growth of the stock market?
Could you imagine an investment product that provides the
downside guarantees of an annuity?
Equity Index Annuities
The new innovation of the
90's. The Equity Index Annuity provides a;
- GUARANTEE - NO LOSS PROVISION
This means that once you make a premium payment you will never have
less in your account than your premium payment.
- This means that once interest has been credited to your equity
index annuity the value of your annuity will never decrease unless
you make a withdrawal even if the stock market goes down.
- LONG TERM STOCK MARKET
- This means that the
Interest Rate set by the insurance comapny at the end of each
policy year is based on the performance of the S&P 500 Index. The
method by which the interest rate is calculated and the percentage of the
gain of the S&P 500 Index that is credited to your annuity is referred to
as the Participation Index Rate.
Glossary of Terms
The following are terms used in describing what an Equity Index Annuity is
and how the interest rate is calculated.
- Standard & Poors
- This is an index which
was devised a number of years ago by the Standard & Poor's Company. Today
the S&P 500 Index is widely regarded as the
benchmark index by which U.S. stock market performance is measured.
- Index Average
- Instead of using the
percentage change over the policy year some companies use an averaging
method. They calculate the change by averaging the daily closing S&P 500
values or the monthly S&P 500 values. The averaging method also tends to
lower the overall rate of return of the S&P 500 Index, similar to that of
a "cap". In rising markets the averaging method limits the increase that
would be credited to your annuity policy.
- Highwater Method
- Companies that use this
method take the value of the S&P 500 Index on the day your policy
is issued and subtract that value from the highest value the S&P 500
reaches during the term of your contract. The term of the most commonly
used are 5 and 7 year durations. The difference between the value of the
S&P 500 on the day you purchased your policy and the highest value reached
is converted to a percenatge. The amount of money you intially deposited
in your policy is multiplied buy their percentage change to arrive at
your contract value.
"Standard & Poor's", "S&P
500", "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by companies offering
Equity Index Annuities. The product is not sponsered, endorsed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no
representations regarding the advisability of purchasing the product.