The equity-indexed annuity (EIA) was introduced in 1995 and became a fast-growing alternative to fixed-rate annuities and certificates of deposits.

EIAs provide a guaranteed interest rate combined with the ability to earn a percentage of certain market-driven indexes, borrowing characteristics from fixed-rate and variable-rate annuities.

The percentage of the index's gain that a customer receives is called the "participation rate." These rates vary, with some companies offering 50 percent and others offering 100 percent or more — but you have to read the fine print.

That's where the similarities end. There are many ways insurance companies calculate your index-linked returns. Here, we've put together an overview of the most widely used methods:

• The European, or point-to-point, method divides the index on the maturity date by the index on the issue date and subtracts 1 from the result. (Other indexing methods use this same formula, with different data points.) This ignores all the fluctuations between start and finish, and makes this method the simplest both to understand and to calculate. One drawback is that market fluctuations can produce very different results for customers who bought the policy just a few days apart. The method's name comes from European stock markets, where options can be exercised only on their expiration date.

• The Asianing method involves averaging several points of the index to establish the beginning and/or ending index. This method can help shield consumers from the risk of a market decline on the maturity date. Some companies take an average of the 12 monthly indices to establish the policy's maturity index level. This method takes its name from the Asian stock markets.

• The look-back or high-water-mark method is another popular approach. On each policy anniversary, the company notes the index level. The highest of these is then taken and figured as the index level on the maturity date.

• The low-water-mark method uses the lowest of the indices on each of the policy anniversaries before maturity as the level of the index at issue. This method tends to lessen the risk of market decline.

• The annual reset, or cliquet or ratchet, method is among the most complicated. The increase in the index is calculated each policy year by comparing the indices on the beginning and ending anniversaries. Any resulting decreases are ignored. Appreciation is figured by adding or compounding the increases for each policy year.