An index annuity is a type of insurance product that offers tax-deferred growth and protection against market downturns. It is essentially an annuity contract with an underlying investment linked to a stock market index, such as the S&P 500. The performance of the indexed account is based on the movement of the selected index; if the index goes up, so does the value of the annuity's indexed account. However, if the index declines in value, the annuity's indexed account will also decrease in value but not below the initial investment or the guaranteed minimum interest rate specified by the insurance company. This provides a level of protection for the policyholder’s principal and can help to mitigate losses during market downturns. Indexed annuities typically have surrender charges, which are fees imposed if the contract is cancelled within a certain period after purchase. They also offer guaranteed lifetime income through optional riders or at the end of the accumulation phase when annuitized.