Equity-Indexed Annuities: What You Need to Know

Editor's note: This is a special investor alert from FINRA -- Financial Industry Regulatory Authority. It has been republished for TheStreet.com readers.

Why an Alert on Equity-Indexed Annuities?

Sales of equity-indexed annuities (EIAs) have grown considerably in recent years. Although one insurance company at one time included the word "simple" in the name of its product, EIAs are anything but easy to understand. One of the most confusing features of an EIA is the method used to calculate the gain in the index to which the annuity is linked. To make matters worse, there is not one, but several different indexing methods. Because of the variety and complexity of the methods used to credit interest, investors will find it difficult to compare one EIA to another.

Before you buy an EIA, you should understand the various features of this investment and be prepared to ask your insurance agent, broker, financial planner, or other financial professional lots of questions about whether an EIA is right for you. ...