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Apr 16, 2019 by |

Alameda County and California Annuity and Financial Elder Abuse Attorneys: What You Need to Know About Annuity, Whole Life Insurance, and Equity-Indexed Life Insurance Risks


Beware Annuities, Whole Life Insurance and Equity-Indexed Universal Life Insurance

Drawbacks and Downsides

Unsuitable for Seniors

Sales of annuities and whole life insurance and universal life insurance are trending up in 2019. That’s bad news. In uncertain times, insurance agents and financial advisors push annuities and life insurance as “secure” retirement savings plan, particularly for seniors concerned about future income.  Beware.  Annuities, whole life insurance, and equity-indexed universal life insurance are costly, complicated, and risky, and often unsuitable for the consumer.  If you already have a policy, an agent may try and convince you to exchange it for a new contract. Beware of that advice too.  Replacements/exchanges can result in surrender charges and tax liabilities.

Our lawyers recommend avoiding sales and exchanges of immediate or deferred annuities and whole life insurance and equity-indexed universal life insurance altogether, especially for seniors.[1]  If you’re over 60 and live in California and have suffered a loss due to cancellation, replacement, full or partial surrender, or high fees on any type of annuity, whole life insurance or equity-indexed universal life insurance call the California financial elder abuse, life insurance, and annuity attorneys at Evans Law Firm, Inc. today at 415-441-8669 for a free review of your policy.  A list of major carriers in California appears below.

Here are some general downsides you should know when considering annuities, whole life insurance and equity-indexed universal life insurance:

  • Annuities, whole life and equity-indexed universal life insurance are illiquid. Access to your money in these policies is limited. This is a real danger particularly for seniors who may need their money. Some carriers charge surrender penalties on withdrawals for 14 years or more! Market value adjustments levied by some carriers may also decrease your account’s cash value. Withdrawals will be subject to tax at ordinary rates unlike growth in mutual funds, generally taxed at capital gains rates.
  • Company risk. Annuities and life insurance are not insured investments such as bank deposits through the Federal Deposit Insurance Corporation (FDIC) and securities accounts through the Securities Investor Protection Corporation (SIPC). Income payments under an annuity and benefits under a whole or equity-indexed universal life insurance policy are only as good as the carrier’s promise to pay. Be particularly wary of higher interest rates often offered by lower-ranked carriers.
  • Fees. Embedded fees in annuities with “extra” benefits, known as riders, can run as high as 4% annually.
  • Interest rates. Interest rates have been low for the last thirty years and insurance companies keep guaranteed rates low even though advertised rates seem higher than returns on bank deposits. But the advertised rates may never materialize on your money because policy caps, participation rates, and spreads will limit your gains. Caps limit how much money you may earn on your policy. Participation rates hold you to a percentage of your chosen fund, never 100%; so if a fund grows 4% and your participation rate is 80% you only get 3.2%. Spreads are a baseline over which interest may be credited. If the spread on your contract is 4%, for example, and the index returns 4%, you will be credited nothing. Drags on returns like caps, participation rates, and spreads are not imposed on direct mutual fund investments. Annual fees are typically lower on mutual funds as well.
  • Opportunity costs. Because annuities and life insurance are illiquid, your money is locked in and is not available for other types of investments. You face a real risk that you could have done better if you had put your money elsewhere. Historically, for example, returns on mutual funds outperform annuities when dividends are reinvested. Direct stock and mutual fund investments do not carry fees as high as those imposed under annuities and do not exact surrender penalties on withdrawals.

Bottom line is, beware. Annuities, whole life insurance and equity-indexed universal life insurance are complicated, and this is just a brief overview. Always consult a qualified professional who does not stand to gain from your purchase and review any proposed investment or change in investments with your tax advisor before making any purchase, replacement or surrender.  Withdrawals from annuities, for example, are generally taxed at ordinary rates not preferential capital gains rates.

Contact Us

If you or a loved one has suffered loss on an annuity, whole life insurance policy or equity-indexed life insurance policy in California, contact Alameda County and California life insurance, annuity and financial elder abuse attorney Ingrid M. Evans and the other attorneys at Evans Law Firm at (415) 441-8669, or by email at <a href=””></a>. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement.  We handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.

Annuities and life insurance produce large sales commissions for brokers but are often inappropriate products for consumers, especially seniors. Leading providers and distributors of life insurance and fixed, variable and fixed indexed deferred annuities in California are listed below.  We are not in any way suggesting that any of these carriers or distributors has done anything wrong or poses a company risk.  Rather, the list is provided solely as a reference for our readers.

AIG/American General Life Insurance Company

Allianz Life Insurance Company of North America

American Equity Investment Life Insurance Company

American General Life Insurance Company/AIG

American National Life Insurance Company

Ameriprise Financial/RiverSource Life Insurance Company

Ameriprise Financial/Securities America, Inc.

Athene Annuity & Life Assurance Company

Athene Annuity and Life Company

Athene USA

Aviva Life Insurance Company

AXA Equitable Life Insurance Company/AXA US

Bankers Life Insurance and Casualty Company

Berkshire Hathaway Group

Berkshire Hathaway Life Insurance Company of Nebraska

Brighthouse Financial, Inc./MetLife

Citigroup Global Markets, Inc.

Crump Life Insurance Services, Inc.

CUNA Mutual Group/CMFG Life Insurance Company

Delaware Life Insurance Company

EquiTrust Life Insurance Company

Fidelity & Guaranty Life Insurance Company

Forethought Life Insurance Company/Global Atlantic Financial Group

Genworth Financial, Inc.

Genworth Life and Annuity Insurance Company

Genworth Life Insurance Company

Global Atlantic Financial Group/Forethought Life Insurance Company

Guardian Life Insurance Company

Guggenheim Partners/Security Benefit Life Insurance Company

ING USA Annuity and Life Insurance Company

Jackson National Life Insurance Company

John Hancock Life Insurance Company

Lincoln Benefit Life Company

Lincoln Financial Group

Massachusetts Mutual Life Insurance Company

Merrill Lynch Life Agency Inc.

Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.

Minnesota Life Insurance Company

National Life Group

National Life Insurance Company/Equity Services, Inc.

National Western Life Insurance Company

Nationwide Life Insurance Company

New York Life Insurance Company

North American Company for Life and Health Insurance

Northwestern Mutual Investment Services, LLC

Northwestern Mutual Life Insurance Company

Northwestern Mutual Wealth Management Company

Oxford Life Insurance Company

Pacific Life Insurance Company

Principal Financial Group

Prudential Life Insurance Company

Raymond James Insurance Group

Reliance Standard Life Insurance Company/Tokio Marine Group

RiverSource Life Insurance Company/Ameriprise Financial

Securities America, Inc./Ameriprise Financial

Security Benefit Group, Inc.

Security Benefit Life Insurance Company/Guggenheim Partners

Security Investors, LLC

The Standard Life Insurance Company

Symetra Financial Corporation

Symetra Life Insurance Company

Transamerica Life Insurance Company

Unum Life Insurance Company of America

USAA Life Insurance Company

Voya/Reliastar Life Insurance Company

Wells Fargo Advisors

Western & Southern Financial Group

The Western & Southern Life Insurance Company

World Financial Group Insurance Agency, Inc.

[1] The attorneys at Evans Law Firm do not provide investment or tax advice but our litigators represent senior policyholders who lose money through cancellations, surrenders or fees on these contracts or as the result of insufficient disclosures by insurance agents and carriers.

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