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Index Annuity Questions You Should Ask:

• What is the guaranteed fixed index annuity minimum interest rate?
   
• How Long is the fixed indexed annuity term?
   
• What is the participation rate? For how long is the participation rate guaranteed?
   
• Is there a minimum participation rate?
   
• Does my indexed annuity have an interest rate cap? What is it?
   
• Does my fixed index annuity have an interest rate floor? What is it?
   
• Is interest rate averaging used?  How does it work?
   
• Is interest compounded during a term?
   
• Is there a margin, spread, or administrative fee? Is that in addition to or instead of a participation rate?
   
• What indexing method is used in my index annuity?
   
• What are the surrender charges or penalties if I want to end my fixed indexed annuity early and take out all of my money?
   
• What are the pros and cons of indexed annuities?
   
• Can I get a partial withdrawal without paying charges or losing interest?
   
• Does my fixed indexed annuity have vesting? If so, what is the rate of vesting?
  

Annuity products:

Type of arrangement or product: Immediate fixed annuities; Basic description: Immediate annuities are insurance products that provide immediate income for a pre-determined period of time such as  for the life of the contract holder or a specified number of years. Payments promise a set regular amount based on a certain interest rate.

Type of arrangement or product: Immediate variable annuities; Basic description: Like immediate fixed annuities, these contracts  provide immediate income for a pre-determined period of time. Unlike  immediate fixed annuities, the payments may increase or decrease based on performance of underlying investments the purchaser selects.

Type of arrangement or product: Deferred fixed annuities; Basic description: Deferred annuities generally have an accumulation, or investment, phase as well as the option of a payout, or income, phase. There may be a one-time purchase or a series of purchases made  over time. Payments from the annuity for a set regular amount are to begin in the future rather than immediately. An example of a variation is a deeply deferred annuity, also known as commercial "longevity insurance," which may begin payments starting after a late age, such as 85.

Type of arrangement or product: Deferred variable annuities; Basic description: Deferred annuities have an accumulation and potentially a payout phase where the accumulation and regular payments may vary based on performance of underlying investments the purchaser selects. The payout phase may feature fixed or variable payments.

Type of arrangement or product: Indexed annuities; Basic description: Indexed annuities offer a return computed by reference to (but not necessarily the same as) an outside index such as the S&P 500 Composite Stock Price Index, often promising a minimum contract value regardless of index performance.

Type of arrangement or product: Annuities with guaranteed living benefits; Basic description: Newer annuities, including variable annuities, frequently offer optional features that provide various protections or guarantees, subject to certain restrictions. For example, a minimum withdrawal benefit provides for periodic withdrawals of a specified percentage of the investment (e.g., 5% to 7%) and further provides that the insurance company will continue payments of that  amount if the account is depleted by reason of permitted withdrawals and/or investment performance. These withdrawals generally will continue until the original investment has been recouped or, in the case of a so-called "lifetime withdrawal benefit," for the life of the contract owner.

Source: GAO analysis of government and industry documents.