Introduction
Fixed Index Annuities are contracts between the annuitant and an insurance company in which the insurance company promises to credit interest based on the performance of a certain stock market index. Fixed Index Annuities have an inbuilt capital protection feature, so your principal will remain safe even if the index goes down.
Annuities are complex products, and many advisors try to missell them without properly understanding the buyer’s needs. Thus, you must educate yourself on these products and not solely depend upon the annuity agent’s high-pressure sales pitch.
This article discusses an in-depth review of the EquiTrust Bridge Fixed Indexed Annuity. EquiTrust Bridge Indexed Annuity is a deferred, fixed-indexed annuity that may be a good option if you are looking for a fixed-indexed annuity that offers tax-deferred growth and downside protection with a core focus on Long-term Care (LTC) benefits and accumulation. This annuity offers some good indexing options, which have the ability to provide reasonably expected (good but not the best) returns in the market. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the EquiTrust Bridge Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Product Policy
- Rates and Costs
- Riders
- What Makes This Product Stand Out?
- What I Don't Like
- Company Details
- Conclusion
Product Description
The EquiTrust Bridge is a Fixed Indexed Annuity (FIA) plan that offers the annuitant (annuity investor) an opportunity to earn a market index-linked return without having to incur the risk of market downside. This is a suitable plan for people who are looking for a fixed-indexed annuity that offers tax-deferred growth and downside protection with a core focus on long-term care (LTC) benefits and accumulation potential.
Let’s have a look at the high-level fine print of the EquiTrust Bridge Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | EquiTrust Bridge |
|---|---|
Issuing Company | |
AM Best Rating | B++ (5th of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Maximum Issue Age | 80 Years |
Minimum Initial Purchase Amount | $50,000 |
Crediting Period and Strategies |
|
Plan Types |
|
Indexes |
|
Free Withdrawals | 10% of the annuity’s Accumulated Value per year |
Death Benefit | Upon the annuitant’s death, the beneficiary will get greater of (i) Account Value or (ii) Surrender Value |
Free Benefits |
|
Riders | Paid Long-Term Care (LTC) Benefit Rider |
Surrender Value | Account Value less any withdrawal charges/ MVA |
RMD Friendly | Yes |
Product Policy
How does the EquiTrust Bridge Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 80) can purchase the EquiTrust Bridge Fixed Indexed Annuity with a minimum initial purchase amount of $50,000, and in return, they will earn market index returns (calculated through a formula that we will discuss shortly), credited as per the chosen crediting period. Apart from the regular crediting period, there are various events that may trigger earnings credit: On free withdrawals, for a long-term care event or terminal illness or injury event, or when a death benefit is payable. The annuity also offers a paid long-term care (LTC) rider that pays tax-free benefits for qualified long-term care services. We will discuss this further in the latter section of this annuity review.
The EquiTrust Bridge Fixed Indexed Annuity allows the annuitant to choose from one or more of the three indexes (S&P 500 Index, Barclays Focus50 Index, and S&P MARC 5% Excess Return Index) to determine their earnings crediting formula. The S&P 500 index has 3 crediting strategies, and the other two indexes have 1 strategy each. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 6 strategy options. We will discuss each available index briefly:
1. S&P 500 Index
The S&P 500 index is one of the most popular and oldest indexes in the world. It tracks 500 large-cap publicly traded stocks listed in the United States. It is a reliable index and has often succeeded in the test of time. It is very important to note that, similar to most other annuities, the EquiTrust Bridge Fixed Indexed Annuity offers the S&P 500 index with cap rates and participation rates in place, meaning that your actual interest credited will be lower compared to the actual index return. These rates change frequently; I will discuss the rates in detail shortly.
2. S&P MARC 5% Excess Return Index
The S&P MARC 5% Excess Return Index is a multi-asset index designed to provide diversification within a risk-weighted framework. It tracks three underlying component indices representing equities (S&P 500), commodities (S&P GSCI Gold), and fixed income (S&P 10-Year U.S. Treasury Note futures). The index dynamically rebalances between these asset classes and cash to target a 5% level of volatility. This approach aims to protect against market downturns but also limits the index upside.
3. Barclays Focus50 Index
The Barclays Focus50 Index is a rules-based equity index that selects and tracks a portfolio of 50 large-cap U.S. companies from the S&P 500. It is designed to focus on factors such as growth, quality, and stability, which are believed to contribute to long-term outperformance. The index's strategy combines these equities with U.S. Treasury bonds, creating a dynamic mix that seeks to balance growth opportunities with risk management. By employing this approach, the Barclays Focus50 Index aims to offer investors a potentially more stable investment option in the U.S. stock market. However, it is important to note that although this approach aims to protect against market downturns, it also limits the index upside.
It is very important to note that like other Fixed Indexed Annuities, the EquiTrust Bridge Fixed Indexed Annuity comes with cap rates, participation rates, etc., for these indexes, meaning that you will be credited only a part of the index return to your annuity. These rates change frequently; I will discuss more on these rates more shortly.
Note: In addition to allocating the funds in the following indexes, the annuitant also has the option to allocate funds at a fixed interest. These Fixed Rates change from time to time. The 1-year Fixed Value Rate for the 10-year withdrawal charge period at the time of writing this article was 4.50%.
Rates and Costs
The earnings crediting formula
The earnings crediting formula is the most important part of this annuity discussion. It is important to know that we don’t simply get the index return credited to our annuity. The company has a few rates, caps, etc, in place that affect our earnings. These rates tend to change over time, and the updated rates can always be checked on the company’s website.
Let’s have a look at the EquiTrust Bridge Fixed Indexed Annuity rate sheet (as of August 2024) to understand how the earnings are determined.
| Index | Strategy | Rate |
|---|---|---|
1-Yr Fixed Interest | Fixed Rate | 4.50% |
S&P 500 | 1-Yr Pt-to-Pt Cap | 8.00% |
1-Yr Pt-to-Pt Par | 45.00% | |
1-Yr Monthly Average Par | 80.00% | |
Barclays Focus50 | 1-Yr Pt-to-Pt Par | 145.00% |
S&P MARC 5% ER | 1-Yr Pt-to-Pt Par | 170.00% |
From the above rate chart, you will notice 6 interest-crediting options (one fixed and five indexed). Let’s take a closer look at the various terms the company uses in the EquiTrust Bridge Fixed Indexed Annuity rate chart:
- Point-to-point with Cap Rates: This refers to the rate at which your interest-earning capacity is capped. For example, if an index returns 12% but the contract’s cap rate is 6%, the annuitant will be eligible for an interest credit of 6% only. It doesn’t matter how much the index goes above the cap rate; the maximum interest that can be earned is the cap rate.
- Point-to-point with Participation Rate (PR): The participation rate describes the annuitant’s participation percentage in a return of an index. For example, suppose the participation rate is 150%, and the index returned 4% over the agreed time. In that case, the annuitant will be eligible for 150% of the return, i.e., 6%.
- One-Year Monthly Index Average with Par Rate: This strategy begins by recording the initial value of a selected index at the onset of the contract term. Subsequently, the index's value is captured monthly. After a one-year duration, these monthly index values are aggregated and then averaged by dividing the total by 12. This average, multiplied by a participation rate, helps decide the interest added to the annuity.
- Fixed Account Rate: If you opt for a fixed account rate, you simply earn the fixed rates for a particular period specified by the company before your policy begins. These rates are usually low/at par as compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario. The 1-year fixed rate on this policy at the time of writing this article was 4.50%.
Among these strategies, I prefer the S&P 500 Index with 1-yr point-to-point with a cap option, 1-yr monthly average par option, and the S&P MARC 5% Excess Return Index with a Par rate option. I avoid any S&P 500 strategy with a participation rate because the company offers a very low participation rate for the S&P 500 Index.
You will notice that this annuity offers higher cap and participation rates compared to other "bonus" annuities, such as the EquiTrust MarketTen Bonus, EquiTrust MarketPower Bonus, and EquiTrust MarketForce Bonus annuities. This is because those annuities provide an upfront bonus, which can slightly reduce the growth potential by offering lower caps or participation rates in exchange for the initial bonus. Essentially, it's a trade-off: with bonus annuities, you get an immediate boost to your premium, but the long-term growth potential may be more limited compared to non-bonus options.
Ultimately, the choice depends on your priorities—whether you prefer the immediate benefit of an upfront bonus or the potential for higher growth over time. It's up to you to decide which approach aligns better with your financial goals and risk tolerance.
Surrender/Early Withdrawal Charge
Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal that is above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies, although certain charges and penalties may apply. Any amount withdrawn in excess of the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule for the EquiTrust Bridge Fixed Indexed Annuity.
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 9% | 8% | 7% | 6.5% | 5.5% | 4.5% | 3.5% | 2.5% | 1.5% | 0.5% | 0% |
Market Value Adjustments - In case you need to surrender your policy, a Market Value Adjustment (MVA) will be applied to the portion of the withdrawal or surrender that exceeds the free withdrawal amount during the withdrawal charge period. The surrender charge schedule is different for the different tenures of annuities and also changes for some states. The surrender charge of EquiTrust Bridge Fixed Indexed Annuity is in line with other annuity issuers.
Contract/Administrative Charge
The EquiTrust Bridge Fixed Indexed Annuity does not charge any annual contract or administrative fees. However, it includes a long-term care (LTC) rider, which incurs a rider fee based on the annuitant’s attained age and underwriting class. Additionally, premiums received in the first year are subject to a 1% premium load. We will discuss this in further detail in the following section.
Riders
The Long-Term Care (LTC) Rider is a prominent feature of the EquiTrust Bridge Fixed Indexed Annuity, designed to provide additional financial support for individuals requiring long-term care services. This rider offers tax-free* benefits for qualified long-term care services, which may include home health care, assisted living, adult day health care, or nursing home care. It is an optional rider that involves additional fees but significantly enhances the annuity's utility for policyholders concerned about future care costs.
Rider Qualification
This rider is issued automatically with the annuity contract and is fully guaranteed. Importantly, it cannot lapse, ensuring continuous coverage as long as the base annuity remains active.
Assured Digital Underwriting
The LTC Rider is underwritten by Assured Allies through a digital process, including a video interview. Applicants are assigned to one of three underwriting classes: Preferred, Standard, or Secure. The interview process typically lasts 30 minutes and includes identity verification and screening tests such as healthcare status, physical exams, and cognitive tests. This digital process streamlines underwriting while ensuring proper assessment.
Coverage Ratio
Policyholders can select a Coverage Ratio, which is a multiple of the first-year premium, subject to underwriting. This ratio determines the initial LTC Benefit Base. The maximum ratio depends on the age and underwriting class of the applicant and can range between 100% and the maximum allowed.
LTC Benefit Base
The initial LTC Benefit Base is calculated as:
The Benefit Base grows at a 2% annual rate for up to 20 years or until a claim is made, whichever comes first. However, the Benefit Base is reduced proportionally by the amount of benefits paid out during long-term care usage. Additionally, premium additions in the first contract year are multiplied by the Coverage Ratio and added to the Benefit Base, while later premium additions increase the base dollar-for-dollar. Withdrawals from the annuity reduce the Benefit Base proportionately.
Monthly Benefit Amount
The monthly benefit amount is determined at the time of claim and is based on the Long-Term Care Benefit Base. It is calculated as:
This ensures that the policyholder receives consistent monthly payments for five years (60 months), with the option for benefit payments to continue even after the annuity's Accumulation Value is depleted.
Frequency and Duration of Benefit Payments
The long-term care benefits are paid out monthly over a five-year period. Payments reduce the annuity's Accumulation Value dollar-for-dollar, though they can continue beyond the depletion of the annuity's cash value if required.
Vesting Schedule
A four-year vesting schedule applies to the LTC Rider, with vesting percentages increasing incrementally as follows:
- 20% vested after the first year
- 40% after the second year
- 60% after the third year
- 80% after the fourth year
- 100% after the fifth year
Once fully vested, the policyholder is entitled to the full amount of benefits as outlined by the rider.
Benefits Eligibility
Eligibility for long-term care benefits is based on the following conditions:
- The inability to perform two of the six Activities of Daily Living (ADLs) or cognitive impairment
- A plan of care prescribed by a physician
- Benefits must be used specifically for qualified long-term care services
Annual Certification
To maintain eligibility for LTC benefits, an annual certification of ADL impairment or cognitive impairment is required from a physician.
Benefits Taxation
The benefits received through the LTC Rider are tax-free, subject to daily IRS maximums. Additionally, recipients are not required to submit records to EquiTrust or the IRS unless the benefit exceeds the IRS limits.
Rider Charges
The LTC Rider is subject to a 1.00% premium load for any premiums paid in the first contract year. Additionally, a monthly rider charge applies, calculated as a percentage of the policyholder's attained age, underwriting class, and Net Amount at Risk. These charges reduce the Minimum Guaranteed Contract Value and Accumulation Value dollar-for-dollar. Charges continue after a rider claim and until the Accumulation Value reaches zero.
Rider Termination
The Long-Term Care Rider will terminate under the following conditions:
- Death of the owner
- Surrender of the base annuity contract
- Depletion of the Accumulation Value due to non-LTC withdrawals or surrender
- Annuitization of the base annuity contract
- Change in owner or annuitant
- Spousal continuation of the base contract
- Reduction of the Benefit Base to zero due to benefit payments
Inflation Protection (Optional)
An optional Inflation Protection feature is available, which modifies several aspects of the LTC Rider, including:
- Reducing the maximum Coverage Ratio to 100% of the premium
- Increasing the first-year premium load based on age and underwriting class
- Limiting the maximum Year 1 LTC coverage to $250,000
- Increasing the LTC Benefit Base by 5% annually until the time of claim
In summary, the Long-Term Care Rider in the EquiTrust Bridge Fixed Indexed Annuity is a comprehensive feature that provides critical financial protection for policyholders concerned about long-term care expenses. With its flexible coverage ratios, growing benefit base, and tax-free benefits, this rider offers significant value, particularly for those planning for future care needs. However, potential policyholders should carefully consider the associated costs, including rider charges and the first-year premium load, before opting in.
NeverStop Wellness Program
The NeverStop℠ Wellness Program is an innovative feature designed to encourage healthy living and support successful aging. Through individualized coaching, the program provides policyholders with access to a variety of wellness services, helping them maintain a proactive approach to their health. This rider complements the financial protection of the annuity by promoting long-term well-being, which could reduce the need for long-term care services in the future.
The NeverStop Wellness Program offers personalized guidance to policyholders, including assessments, tailored action plans, and ongoing support. Participants can earn Wellness Credits every two years, for up to 20 years, based on their active involvement in the program. These credits are added to the Long-Term Care (LTC) Benefit Base at the time of claim, effectively increasing the amount available for long-term care benefits.
The amount of Wellness Credits awarded is tied to the Net Amount at Risk at the start of each two-year period, with the percentage varying by the risk class of the policyholder. Active participation is crucial, as incomplete involvement in the program will result in only partial credits being awarded.
In addition to financial benefits, the program also provides access to several additional wellness services, such as:
- Wellness websites
- Mobile apps
- Special offers and subscriptions
- Discounts for various wellness and aging-related services
- Access to a wellness concierge for personalized guidance and resources
Qualification
Enrollment in the NeverStop Wellness Program is automatic upon issuance of the annuity contract, and a $100 annual fee is charged to the annuity's Accumulation Value at the beginning of each contract year. This fee remains applicable for the lifetime of the contract. However, the rider can be terminated at any time by the policyholder after the contract has been issued. It is important to note that there is no annual fee for the NeverStop Wellness Program Rider in the state of Ohio.
Also, as with most annuities, the EquiTrust Bridge annuity also has free in-built nursing homes and terminal illness waivers.
Nursing Home Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is confined to a Qualified nursing home for at least 90 consecutive days. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.
Terminal Illness Waiver: After the first contract year, an annuitant can withdraw up to 75% of the contract’s accumulated value if he is diagnosed with a terminal illness. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.
Besides the Nursing Home Waiver and the Terminal Illness Waiver, the company also offers a Minimum Guaranteed Contract Rate (MGCR) provision.
Minimum Guaranteed Contract Rate (MGCR) - The Minimum Guaranteed Contract Rate (MGCR) provision ensures that the account value of your annuity will be no less than 87.5 of the initial premium, adjusted for any withdrawals, upon reaching the 10-year milestone.
Suppose you invest an initial premium of $100,000 in an annuity product that offers an MGCR feature. Over the course of 10 years, you make withdrawals totaling $20,000.
Initial Premium: $100,000
Total Withdrawals: $20,000
Net Account Value (Initial Premium - Withdrawals): $80,000
The MGCR feature guarantees that your account value will be at least 87.5% of the initial premium, less any withdrawals, at the 10th anniversary.
MGCR Calculation:
87.5% of Initial Premium = 0.875 * $100,000 = $87,500
Adjusted for Withdrawals: $87,500 - $20,000 = $67,000
Therefore, at the end of the 10-year period, the MGCR ensures that your account value will not be less than $67,500, regardless of market conditions or investment performance.
What Makes This Product Stand Out?
The EquiTrust Bridge Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are:
- The plan offers the S&P Index with decent indexing options
- Long-term care (LTC) coverage that provides tax-free benefits for qualified LTC services: Simplified underwriting with guaranteed approval and enrollment to the NeverStop Wellness Program
- Free MGCR Provision
- No annual contract, mortality & expense, or administrative fees
- Free Confinement and Terminal Illness Waiver Benefit: This no-fee rider is automatically included for owners under age 60 and includes both a Qualified Nursing Care and Terminal Illness Benefit:
- Multiple Payout Options: Lumpsum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
What I don’t like
This product is decent for those seeking growth and safety, but there are a few aspects that could provide more value to the annuitant. Some of the features I don't like about the policy are:
- High initial premium requirement
Company Details
You must always keep in mind that, unlike CDs, annuities are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. An annuity's "guarantee" is only as strong as the insurance company that issues the annuity, so it is always important to assess the issuing company before buying an annuity.
EquiTrust Life Insurance Company
EquiTrust Life Insurance Company, established in 1996, is a national provider of annuity and life insurance products. Known for its niche offerings, EquiTrust specializes in fixed-indexed annuities and single-premium life insurance products. The company has developed a strong reputation, particularly among retirees, due to its focus on wealth transfer solutions and income annuities.
The company was acquired by Guggenheim Partners in 2011, which further strengthened its investment management capabilities. Despite its relatively small size in the industry, EquiTrust has consistently been recognized for its financial stability, having been listed in the Ward’s Top 50 life and health insurance companies for several years.
EquiTrust serves customers nationwide through independent agents and independent marketing organizations (IMOs), focusing primarily on providing income solutions and helping individuals secure their financial future through tax-deferred growth options.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | B++ |
S&P 500 | A- |
Fitch Ratings | A- |
Although the ratings are not the best when we compare them with bigger players, they are good enough for you to consider buying an annuity. As of year-end 2023, some of the financial highlights for EquiTrust Life Insurance Company include its:
- $2.4 billion of capital and surplus
- $27.2 billion in total assets
- 94% of assets invested in Investment-Grade portfolio
Going by the operating history, financial numbers, and ratings, we can safely gauge that you can trust your savings with EquiTrust Life Insurance Company.
Conclusion
With the advancement in healthcare and technology, the average person today is living longer than ever. So, it’s very important to have a stream of income that can grow safely and steadily and have the ability to provide a guaranteed income during the retirement years. This not only helps you mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in your retirement.
The EquiTrust Bridge FIA is a decent annuity that helps you grow your retirement account with less risk. Through its higher caps and participation rates, it potentially offers faster growth with principal protection. The addition of the Long-term care (LTC) rider enhances the product's appeal by offering financial support for qualified long-term care services, ensuring that healthcare expenses during later stages of life are covered without depleting your retirement savings. However, the B++ AM Best Rating may be a consideration for those prioritizing top-tier financial strength.
We understand that choosing the right annuity can be a complex decision, influenced by a myriad of factors such as market conditions, individual financial goals, and evolving life circumstances. To better serve you in this critical decision-making process, we regularly conduct in-depth reviews of various annuity products, examining features, costs, and potential benefits. Dive deeper into our extensive reviews.