What are the advantages of an EIA?
By: Gary Minkin
offer multiple tax breaks, but an EIA can also solve the dilemma of safety vs.
the quest for a better return. It
is a blend of many important features of other annuities. Experts tend to agree that the stock market has risks, but
also has enormous long-term potential. So,
beyond the scope of fixed annuities, an EIA offers potential for better returns
by tying performance to a major stock market index, such as the S & P 500.
But unlike variable annuities, an EIA can deliver safety with no risk, as
in fixed annuities. I canít
over-emphasize how important it is to eliminate all market risk to the buyer for
at least a portion of his or her assets.
does an EIA work?
First, EIAs are issued only by insurance companies.
Generally, itís ďHeads Ė you win; Tails Ė you break even,Ē with
some unique features. Suppose we
move to LAS Vegas for a year. In
the process, you have your bank cash a check for $100,000.
thatís a lot of money, and knowing a bit about the casinos, you might
be a little nervous about losing your hard-earned cash. So I decide to make you a very interesting offer.
You can play the tables all year on your $100,000.
I will guarantee in writing that no matter how bad you do, you cannot
lose! If you stay with it, the worst you can do is break even, and
come home with your original $100,000.
whatís the catch?
You canít lose a penny, but the catch is, you only get to keep part of
your winnings. When itís Heads,
you win. But if itís tails, you
will only break even. The best EIAs
run seven to ten years, and early surrender charges apply.
There is also a lot more information to absorb before you reach for your
checkbook. But this brief scenario
might be a good start.
might be interested, but how do I select an insurance company?
Strong financial ratings from
perhaps two of the major rating services are recommended.
Insist on a company certified by IMSA, the Insurance Marketplace
Standards Association. This
organization reviews sales and marketing material and brochures, illustrations
of costs and benefit, and systems and procedures for dealing with problems and
complaints. Few companies have
earned this seal, which is a testament of high ethical standards and full
disclosure in all dealings with the public.
do I select an agent to help me purchase an EIA?
First, you might find more flexibility and more competitive products by
avoiding S & Ls and banks. Always
avoid a ďone company fits allĒ sales person who has narrowed his or her
field (and your choices) to a single insurance company.
Seek out an experienced full-time professional agent who has one or more
of the industryís advanced credentials. These
include Million Dollar Round Table (MDRT), Chartered Life Underwriter (CLU),
Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), Life
Underwriters Training Council Fellow (LUTCF) or Certified Personal Financial
Advisor (CPFA). Also insist on
membership in the National Association of Insurance and Financial Advisors (NAIFA).
Each of these are impressive kudos, requiring years of study plus a
series of comprehensive courses followed by rigorous testing.
Each also has a strict code of ethics and a system for dealing with
luck and good hunting.
purpose of this short summary is to stimulate discussion of business, savings,
or estate planning issues, not to give tax advice. Clients should contact their tax or legal advisors regarding
their individual situations. I will
answer annuity related questions by mail only.
Send your question and a SASE to the above address.
COMMONLY ASKED QUESTIONS ABOUT EQUITY INDEXED ANNUITIES, or EIAs © COPYRIGHT 10/31/2000 BY GARY MINKIN, LUTCF * P. O. Box 33515, Granada Hills CA 91394 * (818) 363-2211
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