What is a defining feature of Equity Indexed Annuities?

Equity Indexed Annuities are designed to provide a unique blend of features that differentiate them from traditional fixed annuities. A defining feature of these annuities is that they offer the potential for higher returns than traditional fixed annuities. This is primarily because their returns are linked to an equity index, such as the S&P 500. As a result, policyholders can benefit from market gains to a certain extent, while also having a degree of protection against loss, since their principal is generally guaranteed.

This structure allows investors to participate somewhat in the stock market's upside while still having the safety net of a guaranteed minimum return on their investment, making them an attractive option for those seeking both security and growth. Additionally, the fact that they are designed to provide this growth potential while protecting the initial principal helps clarify why the potential for higher returns is a key characteristic of Equity Indexed Annuities.