Texas Insurance Agency: Helping Texans Save!

An Indexed Annuity is a type of annuity contract that pays an interest rate based on the performance of a specified market index, like the S&P 500. Unlike fixed annuities, which pay a set interest rate, or variable annuities, which base their interest rate on a portfolio of securities, indexed annuities offer the potential to earn higher yields when the markets perform well, while also providing some protection against market declines.

Here’s how it works:

• Interest Rate: The interest rate is calculated based on the year-over-year gain or the average monthly gain over a 12-month period of the index.
• Participation Rate: This determines how much of the index’s gain will be credited to your annuity. For example, an 80% participation rate means if the index gained 15%, your annuity would be credited with a 12% yield.
• Rate Caps: These can limit the credited yield. For instance, a 7% rate cap would mean that even if the index gained more, only 7% would be credited to your account.

Indexed annuities aim to provide purchasers with the opportunity to capitalize on the gains of financial markets while offering safeguards against potential losses. Due to their intricate nature, it’s crucial to fully grasp the complete set of stipulations prior to making an investment commitment.

Per the Texas Department of Insurance: Texas law requires you to have at least $30,000 of coverage for injuries per person, up to a total of $60,000 per accident, and $25,000 of coverage for property damage. This is called 30/60/25 coverage.

It is important to understand your current situation and needs when choosing a life policy.  What may be good for someone else, may not be good for you.  Both Term and Whole life have pros and cons.  

Term:

1. It is less expensive to have more coverage. For example, $500,000 of term life insurance is much less than a $500,000 whole life policy.

2. You will have a term of 10, 15, 20, 25, 30 years, etc.  At the end of the term, your coverage will expire.  Depending on your needs for example, this would be great to cover your mortgage if something should happen to you so your family would not have to worry about this.

Whole:

1. It does cost more for less. The reason being is that it does provide other benefits you will not see in term policies.  

2. This coverage does not expire as long as your premiums are paid.  

3. Your premium is fixed for life.  You will not have to worry about the cost increasing during your retirement years for example.

4. This builds a cash value.  You can borrow against the cash value at a future date if needed, for example, or just let it grow.