What is a primary objective of Equity Indexed Annuities?

Equity Indexed Annuities (EIAs) are designed to provide policyholders with the potential for higher returns by linking part of the annuity's performance to a stock market index, such as the S&P 500. This mechanism allows investors to benefit from stock market gains without directly investing in the stock market itself.

While EIAs do offer a degree of protection against market downturns through features like a guaranteed minimum return or principal guarantee, the primary objective is to seek higher returns that can exceed those available from traditional fixed annuities, particularly in rising market conditions. This combination of potential growth with some level of protection against losses makes them an appealing option for conservative investors who still want to participate in equity market gains.

In contrast, providing a fixed minimum return, guaranteeing principal investment, and exclusively investing in bonds are not the main objectives of Equity Indexed Annuities. Fixed returns and principal guarantees are features of many other financial products, while investing solely in bonds does not align with the unique structure and goals of EIAs, which incorporate equity index performance.