Buffered index annuity is a type of registered index-linked annuity (RILA) or fixed indexed structure in which the insurer absorbs a defined portion of index losses"such as the first 10 or 20 percent down"while the contract owner bears losses beyond that buffer, usually in exchange for higher upside potential than traditional FIAs. Unlike principal-protected fixed indexed annuities, buffered annuities expose clients to some downside risk but limit it relative to direct equity investments. Product designs include choices of buffers, caps, participation rates, terms, and index options, allowing customization of risk/return profiles. Because market value can fluctuate with index performance, buffered index annuities are treated as securities and require prospectuses and broker-dealer oversight.

Advisors position buffered index annuities for clients seeking more growth potential than fixed or traditional indexed annuities but who still want defined downside protection. They explain how the buffer works, including what happens if index losses exceed the buffer, and compare different crediting terms and indices. Broker-dealer supervision reviews these recommendations for risk tolerance alignment and disclosure quality. Advisors may use hypothetical back-testing and risk illustrations to show how buffered structures would have behaved in past markets. Understanding buffered index annuities enables advisors to present them as a middle-ground tool between principal-protected annuities and fully market-exposed investments, with clear communication of risks and tradeoffs.