Which type of annuity guarantees a minimum interest rate and has an excess interest feature linked to an external equities market index?

The correct choice is an equity indexed annuity. This type of annuity is designed to provide a minimum interest rate, ensuring that the policyholder's investment does not lose value. Additionally, it offers the potential for higher returns due to its feature linked to an external equities market index. This means the interest earned may exceed the guaranteed minimum, depending on the performance of the selected index, such as the S&P 500.

Equity indexed annuities blend characteristics of both fixed and variable annuities. They offer the security of fixed investments while allowing for greater potential returns associated with market performance, which is not achieved through traditional fixed annuities. In contrast, variable annuities provide investment options in various securities, which means the returns can fluctuate significantly without guaranteed interest. Immediate annuities provide income payments right away but do not link to an external index for additional gains. Fixed annuities, while secure and offering guaranteed returns, lack the growth potential associated with stock market indices, which is a defining characteristic of equity indexed annuities.