How Do Equity Indexed Annuities Work? 
Indexed Annuities use domestic or foreign indices , some in combination with each other . Most annuity carriers buy an index option and exercise the option or allow the option to expire . The earnings are credited to the annuity without dividends through rate caps , participation rates or spreads -LRB- sometimes a combination . -RRB- While indexed annuities dont debit negative returns , policy expenses may generate a negative account . 