When explaining index annuities, which statement is true regarding principal loss?

The statement that will not result in a loss of principal accurately describes index annuities. These financial products are designed to protect the principal amount invested, typically guaranteeing that the owner will not lose their initial investment, regardless of market fluctuations. This is a key feature that differentiates index annuities from other investment vehicles that might expose the investor to potential losses.

The design of index annuities usually involves linking the interest credited to the performance of a specific market index, such as the S&P 500. While the growth potential may be tied to market performance, the fundamental aspect is that the investor's principal is safeguarded, ensuring that they will receive at least the initial amount they invested when the annuity matures or when funds are otherwise accessed.

This protection against loss of principal makes index annuities appealing for conservative investors who want some exposure to market gains without the risk of losing their original investment. As a result, the notion that index annuities ensure this protection is crucial for understanding their suitability and appeal.