Then, how does one select the best FIA? Just like you only know the best stock or the best variable annuity or the best car after it has performed, you should not try to select the best FIA since you do not know how the index will perform (move). However, you should try to diversify among FIAs and you should select insurers with either a good track record regarding participation rates, caps, spreads, etc. or, select an FIA where those parts like participation, caps, and spreads cannot change much or not change at all.

Guarantee Return of Principal
In the 1980’s, almost every annuity had a Guarantee Return of Principal. At the point-of-sale, you could always say: You can never get back less than what you put in, even if you change your mind in 2-4 months from now.

However, in the late 80’s and certainly in the 90’s, annuity marketing became fiercely competitive. Chief actuaries realized that the Guarantee Return of Principal Provision during the initial years was a strain on surplus. Therefore, many insurers deleted this provision, but it enabled the insurer to add other less surplus costing features and benefits.

Typically, Fixed-Indexed Annuities do not offer a Guarantee Return of Principal Provision for the initial years nor is it probably advisable considering the type of investments insurers often purchase for the Fixed-Indexed Annuity, investment grade paper plus call options at the onset.