Which of the following is a benefit of equity-indexed annuities?

Equity-indexed annuities offer a unique benefit by allowing the policyholder to participate in some of the upside potential of the stock market while also having a level of protection against loss. These financial products are designed such that their returns are linked to a stock market index, such as the S&P 500. This means that while the annuity does not invest directly in the stock market, its performance can increase based on the movements of the index.

This structure provides a balanced approach, catering to those who seek growth opportunities associated with equity investments without the complete risks that come with direct stock investments. As the index increases, the policyholder may benefit from higher returns, typically capped at a certain percentage to protect the insurance company from excessive payouts. Conversely, if the market underperforms, the annuity usually guarantees a minimum return, often the principal amount, which protects the investor's initial investment.

While other options imply benefits that may seem attractive, they do not accurately represent the features of equity-indexed annuities. For instance, there's no unlimited investment in stocks, as the gains are limited to the structured participation in the index's performance. Guaranteed returns can exist, but they are not an absolute which directly contradicts the potential for market performance