Floor
The minimum interest a fixed-indexed annuity will credit, protecting against index losses.
The floor is the lowest interest rate a fixed-indexed annuity can credit in a period — most commonly 0%. A 0% floor means that even if the index falls sharply, your credited interest is zero rather than negative, so index declines do not reduce your principal.
The floor is the core downside-protection feature of an FIA and is backed by the claims-paying ability of the issuing insurance company. It is not FDIC insured.
Example
If the index drops 15% in a year, a contract with a 0% floor credits 0% — the principal is not reduced by that index decline.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.
Related Terms
Fixed-Indexed Annuity
An annuity that credits interest tied to a market index, with a floor that protects against index losses.
Cap Rate
The maximum interest a fixed-indexed annuity will credit for a given index period.
Participation Rate
The percentage of an index's gain that a fixed-indexed annuity uses to calculate credited interest.
Sequence-of-Returns Risk
The danger that poor investment returns early in retirement, combined with withdrawals, permanently shrink your savings.
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Annuities are insurance contracts. Guarantees, including guaranteed lifetime income benefits where available, are subject to the claims-paying ability of the issuing insurance company. Product features, fees, withdrawal restrictions, and surrender charges vary by contract.