Fixed Index Annuities (FIA's) are annuities that have the security of a guaranteed interest rate along with the potential to earn more based on the performance of a market index or indexes. Fixed Index Annuities are often interchanged with the term Equity Indexed Annuities, but FIA's can be tied to indexes other than the stock market.
The premium for a Fixed Index Annuity can go in as a simply payment or be paid over time. The potential for growth in an Indexed Annuity is greater than a Fixed Annuity due to the participation in the indexes. However, it maintains the security of the guaranteed interest rate of a Fixed Annuity.
Fixed Index Annuities (FIA) use domestic and/or foreign indices in its performance crediting method. The index method may use rate caps, rate spreads or participation percentages. Some FIAs may use a combination like caps and participation. It is interesting to note that most of these tactics coalesce after ten years. Some FIAs use annual, two year or five year point to point schedules for inception and ending crediting periods.
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The premium for a Fixed Index Annuity can go in as a simply payment or be paid over time. The potential for growth in an Indexed Annuity is greater than a Fixed Annuity due to the participation in the indexes. However, it maintains the security of the guaranteed interest rate of a Fixed Annuity.