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Market Sparks New Interest in Fixed Equity Indexed Annuity


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More and more insurance companies are offering indexed annuities now, especially those who were traditionally only big sellers of variable annuities.  Sheryl Moore’s Insurance News Net article, “Interest in Indexed Annuities on the Rise,” says that you have to look at the market to understand why many companies have decided to sell fixed equity indexed annuity products in addition to their other annuities.

During market increases, many people transfer their money from fixed products to securities so that they can take advantage of the increasing market.  Variable annuities sell very well after the markets hit rock bottom because they can only go up from there.  Market increases provide investors with great gains in their investments.  In a declining market however, investors tend to leave stocks, bonds, and variable annuities for fixed products.  They are fearful of losing money, including both principal and potential gains, so they turn to fixed annuities and indexed annuities.

When fixed interest rates are increasing, there is usually a corresponding increase in sales of fixed annuities and CDs.  When fixed annuity rates were in the double digits, there was an influx of fixed annuity 1035 exchanges and CD rollovers.  During a declining period for fixed interest rates, some investors hold on to their fixed products while others switch to securities like a fixed equity indexed annuity for some potential of a gain.

Taking a combination of these market conditions into effect, indexed annuities stand to gain in a low market with low interest rates.  That is why they have become increasingly popular in the last few years.  Insurance companies who previously disliked the products have realized that they stand to benefit from introducing their own version to consumers.  The principal protection with possible market gains is looking very good to investors right now.

Written by Rachel Summit

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