What is a common characteristic of equity indexed annuities?

Equity indexed annuities are designed to provide policyholders with a way to earn investment returns based on a specific stock market index while offering a safety net through guaranteed minimum returns. This means that irrespective of how poorly the associated index performs, policyholders are assured a minimum rate of return on their investments. This characteristic makes equity indexed annuities appealing to individuals seeking both growth potential and protection from losses, which is why the option regarding a guaranteed minimum return is the most accurate.

The concept of a variable interest rate is more commonly associated with variable annuities rather than equity indexed annuities, where returns are closely tied to the performance of an underlying index rather than being purely variable. Furthermore, while certain insurance products might not be subject to legal reserve requirements, equity indexed annuities typically do fall under state regulations that require insurers to maintain reserves. Lastly, classifying them as term products does not apply; equity indexed annuities are generally more similar to whole-life products that provide benefits over a longer duration rather than being term-based, which primarily cover a fixed period.