Annuity Buyer's Guide To Fixed Deferred Annuities

Annuity Buyer's Guide Prepared by The National Association of Insurance Commissioners.

The National Association of Insurance Commissioners is an association of state insurance regulatory officials.

This association helps the various insurance departments to coordinate insurance laws for the benefit of all consumers. Annuity Buyer's Guide

It is important that you understand the differences among various annuities so you can choose the kind that best fits your needs. This guide focuses on fixed - deferred annuity contracts. There is, however, a brief description of variable annuities. If you're thinking of buying an fixed indexed annuity, an appendix to this guide will give you specific information. This Annuity Buyer's Guide isn't meant to offer legal, financial or tax advice. You may want to consult independent advisors. At the end of this Annuity Guide are questions you should ask your agent or the company. Make sure you're satisfied with the answers before you buy.

Two features that have the greatest effect on the amount of additional interest that may be credited to an equity-indexed annuity are the indexing method and the participation rate. It is important to understand the features and how they work together.

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QUESTIONS YOU SHOULD ASK YOUR AGENT OR THE COMPANY

You should ask the following questions about fixed indexed annuities in addition to the questions in the Annuity Buyer's Guide to Fixed Deferred Annuities.

  • How long is the term? 
  • What is the guaranteed minimum interest rate? 
  • What is the participation rate? For how long is the participation rate guaranteed? 
  • Is there a minimum participation rate? 
  • Does my contract have an interest rate cap? What is it? 
  • Does my contract have an interest rate floor? What is it? 
  • Is interest rate averaging used? How does it work? 
  • Is interest compounded during a term? 
  • Is there a margin, spread, or administrative fee? Is that in addition to or instead of a participation rate? 
  • What indexing method is used in my contract? 
  • What are the surrender charges or penalties if I want to end my contract early and take out all of my money? 
  • Can I get a partial withdrawal without paying charges or losing interest? Does my contract have vesting? If so, what is the rate of vesting?

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