Who's Who in an FIA?

What is a Fixed Indexed Annuity?

A fixed indexed annuity (FIA) is a contract between you and an insurance company.

The contract outlines the details of the agreement.

These include the rights and responsibilities each party has, how long the money is required to stay in the annuity, the way the interest rate is calculated, et cetera. These are all determined by the terms of the specific contract. It’s possible to use an annuity product as a source of guaranteed* lifetime income. They can be set up to allow you to earn a reasonable rate of return** with protection of principal, regardless of what happens in the stock market.

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Who's Who in a Fixed Indexed Annuity?

Three, sometimes four, roles exist outlined in an annuity contract such as an FIA. These are those roles:

  • The issuing insurance company backs the claims of the annuity, including the guarantee that it will remain protected.
  • The contract owner contributes the money into the annuity (This is you, if you decide to purchase one).
  • The annuitant receives the payout from the annuity once the distribution phase begins.
  • Beneficiaries receive a death benefit from the annuity once the annuitant dies.

The contract owner and the annuitant are typically the same person, but there are cases where they can be different people. This is why we say there are three, sometimes four parties involved.

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What is a Fixed Indexed Annuity?

The issuing insurance company will outline all the details in your agreement. As an example, the time during which you must let your annuity grow without withdrawing money. This is known as the accumulation phase. However, if you need to access your money sooner, there could be options available to you. The period when you can begin to withdraw payments is called the distribution phase. Details such as the crediting method and frequency of payments also vary, based on your individual contract.