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Principal Protection

Utilizing insurance to protect principal can provide meaningful benefits to a client's portfolio, as well as to their peace of mind. DPL’s offering of Commission-Free solutions can provide hedging strategies, fixed returns or complete downside protection.

Page Contents
The benefits of Commission-Free fixed index annuities for principal protection
Sequence of Returns Risk Mitigation

Fixed index annuities can be a powerful tool for principal protection, making them attractive for clients nearing or in retirement.

100% Downside Protection

A Commission-Free FIA can give clients’ assets complete downside protection with non-correlated exposure to the market.

Fixed Income Alternative

Research by Roger Ibbotson found fixed index annuities outperformed bonds over time by about 10%.

De-risking Option

Fixed index annuities should be considered as an alternative to bonds to de-risk portfolios from equities as clients near retirement.

Principal Protection Products

Type Summary
Registered Index Linked Annuity

Registered Index Linked Annuities (also known as Structured Variable Annuities or Buffer Annuities) are tax-deferred insurance vehicles that provide upside potential with a defined degree of downside protection. The investor assumes the portion of the market risk that is in excess of the "buffer" or the initial losses before reaching the...

Solves for Principal Protection, Retirement Income
Fixed Index Annuity

Fixed index annuities are tax-deferred insurance products that provide market upside, while protecting principal from market losses. Assets are allocated into indices that are designed to replicate market performance. These fixed index annuity indices are typically accompanied with cap rates, spreads, or participation rates.

Solves for Retirement Income, Principal Protection, Annuity Rescue+
Multi-Year Guaranteed Annuity

Multi-year guaranteed annuities (MYGAs) offer a tax-deferred guaranteed rate of return for the duration of the product. These simple, short-duration annuities are often used by advisors for fixed income allocations.

Solves for Retirement Income, Principal Protection, Tax Deferral
Fixed Annuity

Fixed annuities are simplified products, offering a tax-deferred guaranteed fixed rate of return for a specified period.

Solves for Retirement Income, Principal Protection, Tax Deferral
How DPL helps RIAs address clients’ two biggest concerns

Sam Johnson explains how DPL can help advisors address two of their clients' biggest concerns: market volatility and outliving their money.


Jan 28, 2020
Wade Pfau, Professor of Retirement Income at The American College and DPL Founder and CEO...


Feb 03, 2020
DPL Founder and CEO, David Lau and Wade Pfau PhD, CFA, RICP, discuss the best...


Feb 04, 2020
Wade Pfau PhD, CFA, RICP and DPL Founder and CEO, David Lau discuss how the...


May 31, 2022
Vice President of Member Success, Tim Rembowski, shares how DPL can help financial advisors adjust...


Jun 01, 2022
DPL’s Lead Consultant, Nicole Benz, shares how financial advisors can utilize DPL’s Guaranteed Income Analysis...


Feb 03, 2020
Wade Pfau PhD, CFA, RICP and DPL Founder and CEO, David Lau debunk common myths...


Feb 03, 2020
DPL Founder and CEO, David Lau and Wade Pfau PhD, CFA, RICP talk about the...


Apr 15, 2024
When investors are nervous about the future, annuities can provide protection and peace of mind...


Jun 07, 2022
Vice President of Member Success, Tim Rembowski, explains how the DPL Product Discovery Tools help...

Why do clients need principal protection?

The reasons clients need principal protection can be both financial and psychological. Principal protection is a very attractive feature for conservative clients. Some annuities offer market exposure (fixed index and buffer) while providing downside protection, giving advisors a means of increasing market exposure for these clients.

Principal protection is also extremely important for retirees and near-retirees. Market performance or sequence of returns risk is at its peak in the years just before and after retirement and can have a very significant impact of retirement income. Protecting from loss of principal is also a top concern for many retirees to ensure their peace of mind.

What is a buffer annuity?

A buffer annuity is a relatively new product type designed after a structured note. A buffer provides index investing options similar to a fixed index (FIA), but generally with more investing options. Unlike an FIA where principal is completely protected, buffer annuities offer limited downside protection which can either be structured to have the carrier absorb “first loss” or “tail risk”. Since downside protection is more limited than with FIAs, buffer annuities generally provide more upside potential in the indices.

What annuity types provide principal protection?

Simply by virtue of their structure these annuities provide principal protection: fixed (FA), multi-year guarantee (MYGA), fixed index (FIA), single premium immediate (SPIA), buffer and deferred income (DIA). Variable annuities can also offer optional principal protection features.

A fixed index annuity (FIA) provides principal protection, how do I determine the product cost?

Many FIAs have no explicit product cost. They are “spread” products like bonds or CDs. As such they should be evaluated in the same fashion, based on yield potential and payout rates. While FIAs generally have no product cost for the core product, income riders will have additional fees.