Fundamentals of Equity-Indexed Annuities

In recent years Equity-Indexed annuity sales have hit record levels. That’s a result of investors pur-chasing these annuities without fully understanding the complexities of their contract. Given the scars of past market volatility, the promise of principal protection with potential for growth is appealing to many people. Insurance companies which issue these Equity-Index annuities spend millions of dollars on high end marketing materials in an effort to promote the upside potential with little to no explana-tion of risks and complexities of the contract. Nor do they mention the high level of compensation paid to the insurance agents who sell these products.

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