Equity Indexed Annuity
Definition - What does Equity Indexed Annuity mean?
An equity indexed annuity is an annuity that is tied to an equity and has an interest rate that fluctuates with the performance of that equity.
Many life insurance companies offer equity indexed annuities as an alternative to standard annuities. Unlike equity indexed annuities, standard annuities usually have a fixed interest rate.
Insuranceopedia explains Equity Indexed Annuity
Equity indexed annuities are often tied to two kinds of equities: stocks and indexes. If these perform well, then the interest rate of the annuity can increase. If they don't, however, the annuity holder will not make as much money as they would have otherwise.
Equity indexed annuities are a popular choice for people who want to earn a higher interest rate on their annuities, rather than receiving the standard fixed interest rate.