Index Annuity

What Does Index Annuity Mean?

An index annuity is an annuity linked to an equity index, such as the S&P 500. This type of annuity provides annuitants with the potential to increase their returns if the index performs well. Many insurance companies offer indexed annuities to their customers. Index annuities are one of three main annuity categories, along with fixed and variable products, so reading up on how annuities work can help you compare them.

Insuranceopedia Explains Index Annuity

Index annuities can be influenced by the performance of the stock market, which may create the impression that they are riskier than other types of annuities. However, many index annuities offer protections against stock market declines, helping to mitigate risk for annuitants. These annuities are often a good option for individuals who are interested in a particular index and seek to earn higher returns from their annuities. The same combination of market-linked growth with downside protection also appears in indexed universal life insurance, which applies a similar concept to a permanent life policy.