Equity Indexed Annuities

Table of Contents

Investment Vehicles	1
The Test of Time	2
Finding the Right Product	3
Diversification	5
Rule of 100	6
Who is Managing the Money?	6
The Annuity’s Investment Role	9
Defining the Equity Indexed Annuity (EIA)	11
Annuity Surrender Fees	15
Guaranteed Rates of Return – A Complex Issue	17
Important EIA Fact	19
Index Crediting	20
Participation Rates	21
Averaging	23
Caps	23
Spreads, Margins and Administration Fees	24
Returns	24
Back-testing	25
Indexing Formulas	25
Annual Reset Indexing Method	26
High Water Mark Indexing Method	27
Point-to-Point Indexing Method	28
Multiple EIAs with Diversified Indexing Methods	28
Withdrawing Annuity Funds	29
Payout Options	29
Example	30
Nonhuman Payees Under a Settlement Option	31
Lifetime Income Payout Option	31
Life Annuity, Period Certain Payout Option	32
Joint-and-Last-Survivor Payout Option	32
Required Distribution	33
Financially Sound Insurers	33
Rating Companies	34
A.M. Best Company	34
Demotech, Inc.	35
Fitch, Inc.	35
Moody’s Investor Service	36
Standard and Poor’s	37
Weiss Ratings	37
The History of Weiss Ratings	38
Rating Methods	39
Is the Product Suitable?	40
Questions to ask	41
Suitability Issues	42
It is Not a Liquidity Issue But Rather a Suitability Issue	45
A Comprehensive Financial Plan	46
Example	46
“Laddering” investments	46
Tax Deferred Status	49
Tax-Deferral Exception	51
Exchanges	51
Annuity Gifts	52
Other Tax Issues	52
Annuities are (Sometimes) Protected Assets	52
Probate	54
Sometimes an Annuity is a Bad Idea	55
Age	55
Surrender Penalties	55
Grasping Fundamental Aspects of the Product	56
Terminology for a Complex Product	58
General Contract Provisions	61
Entire Contract	61
Changes and/or Waivers	62
Misstatements	62
Required Reporting	62
State Law	63
Claims of Creditors	63
Other Contract Items	63
Additional Payments	64
Surrender Values and Penalties	64
In Conclusion	65

United Insurance Educators, Inc.

PO BOX 1030

Eatonville, WA  98328

www.UIECE.com

Email: mail@uiece.com

Phone: (253)  846-1155