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Hybrid Annuity Myth - 'Hybrids' Are Fixed Index Annuities. The word 'hybrid' is a confusing sales term and should not be used by marketers. Insurance Companies do not use the word hybrid.

A index annuity is a fixed index annuity, that earns interest or provides benefits that are linked to an external equity reference or an equity index. The value of the index might be tied to a stock or other equity index.  The value of any equity index varies from day to day and is not predictable. When you buy a fixed indexed annuity you own an insurance contract. You are not buying shares of any stock or equity index.

What Are Participation Rates With No Cap?

The participation rate decides how much of the increase in the index will be used to calculate fixed index-linked interest. For example, if the calculated change in the index is 9% and the participation rate is 70%, the index-linked interest rate for your fixed annuity will be 6.3% (9% x 70% = 6.3%).  Some annuity companies guarantee that the participation rate will never be set lower than a specified minimum or higher than a specified maximum.

WHAT IS THE IMPACT OF SOME OTHER FIXED INDEXED ANNUITY PRODUCT FEATURES?

Cap in Interest Earned

While a cap limits the amount of interest you might earn each year, annuity companies with this feature may have other product features you want, such as annual interest crediting or the ability to take partial withdrawals. Also, annuity companies that have a cap may have a higher participation rate. As of  , average annual caps are 4%. This video shows how a participation rate with NO Caps work.

Averaging

Averaging at the beginning of a term protects you from buying your fixed index annuity at a high point, which would reduce the amount of interest you might earn. Averaging at the end of the term protects you against severe declines in the index and losing index-linked interest as a result. On the other hand, averaging may reduce the amount of index-linked interest you earn when the index rises either near the start or at the end of the term.

Interest Compounding

It is important for you to know whether your fixed index annuity pays compound or simple interest during a term. While you may earn less from an annuity that pays simple interest, it may have other features you want, such as a higher participation rate.

WHAT WILL IT COST ME TO TAKE MY MONEY OUT BEFORE THE END OF THE TERM?

In addition to the information discussed in this Buyer's Guide about surrender and withdrawal charges and free withdrawals, there are additional considerations for fixed-indexed annuities. Some annuity companies credit none of the index-linked interest or only part of it if you take out money before the end of the term. The percentage that is vested, or credited, generally increases as the term comes closer to its end and is always 100% at the end of the term.

Monlthly Point to Point

Change in index calculated for each month during the index term.  Each Monthly change is limited to the "cap rate" for positive changes, but not when the change is negative.  At the end of the index term, all monthly changes (positive and negative) are added.  If the result is positive, interest is added to the annuity.  If the result is negative or zero, no interest (0%) is added.

NATIONAL LICENSED INSURANCE SALES PRODUCER #558629

I AM ONLY LICENSED TO SELL INSURANCE PRODUCTS. ANY ADVICE OR SUGGESTIONS I MAY GIVE YOU RELATE ONLY TO INSURANCE PRODUCTS. IF YOU WILL NEED TO SELL, OR ARE CONSIDERING THE SALE OF, OR ARE IN NEED OF ADVICE REGARDING THE SALE OF, ANY SECURITIES IN ORDER TO HAVE FUNDS TO PURCHASE THE INSURANCE PRODUCT(S) THAT I MAY RECOMMEND, YOU WILL NEED TO DO SO INDEPENDENTLY,
With respect to any current and future Presentation and Promotional Material that is sent or distributed by the Respondent in connection with a meeting, any current and future Presentation and Promotional Material will also include the following "THE PRODUCT THAT WILL BE DISCUSSED AT THIS MEETING WILL BE LIMITED TO INSURANCE PRODUCTS.

*National Association Of Insurance Commissioners - You may contact the annuity companies for a free annuity buyers guide.