Understanding Death Benefit Riders
The Death Benefit Sales Pitch
Chances are, if an agent has pitched you on an annuity, he or she touted its “death benefit” as a major selling point. According to the sales pitch, death benefits guarantee your heirs a return of your annuity premium (or more) upon your death. You’ll pay extra for this protection (known as a “rider” to your policy) but the agent will try and convince you the cost is well worth it. The Alameda County and California annuities attorneys at Evans Law Firm advise caution. Every day, we see annuity features like death benefits disappoint policyholders, cost more and more, and erode returns on your hard-earned money. If you or a loved one has lost money due to death benefit or income riders, surrender charges, or other fees associated with an unsuitable annuity, call the financial elder abuse and annuities lawyers today at Evans Law Firm, Inc. (415) 441-8669 and we may be able to help. We represent clients in the State of California.
What’s Wrong with Death Benefit Riders?
Death Benefit Riders are attachments to deferred annuities for which the policyholder pays an additional premium of 1.5% or more on top of all other premiums and fees. The riders go by a variety of names: Enhanced Death Benefit Rider, Accumulator Rider, “Greater Of” Death Benefit, Guaranteed Death Benefit, Return of Premium Rider, and HAV Rider (Highest Contract Anniversary). Whatever the brand name, the fees add up fast. On an annuity offering say a 3% return you might lose half your return when you accept the coverage. And the hit on your return is the tip of the iceberg. Whatever the cost, the death benefit may be pointless because the benefit is rarely paid. That’s because the death benefit is lost when you annuitize (accept the income stream you were promised in the first place), make a withdrawal, or surrender the contract (and likely incur a surrender penalty). Even if some benefit is paid to your heirs, you most likely overpaid for the protection. As an example, a 1.5% death benefit charge on a $250,000 annuity would be $3,750 per year. Published insurance industry data suggests term life insurance in the same amount would be less expensive.
Annuity death benefits may also have tax consequences. While the IRS generally does not tax life insurance proceeds, annuity death benefits may be treated differently. This may particularly be the case if you invest so-called qualified (pre-tax) retirement money in an annuity. At Evans Law Firm, we do not provide investment or tax advice of any kind. We have, however, seen policyholders hit with unexpected tax bills on annuity surrenders and distributions. Be sure to consult with your tax advisor regarding any annuity product and before you select any riders, including income and death benefit riders. The tax implications hold true for any rider by whatever name: Enhanced Death Benefit Rider, Accumulator Rider, “Greater Of” Death Benefit, Guaranteed Death Benefit, Return of Premium Rider, and HAV Rider (Highest Contract Anniversary).
Annuities are extremely complex and not for everybody. Promises of high returns in a low interest rate world really are too good to be true. Promised death benefits may be too good to be true as well, regardless of whether you have an Enhanced Death Benefit Rider, Accumulator Rider, “Greater Of” Death Benefit, Guaranteed Death Benefit, Return of Premium Rider, and HAV Rider (Highest Contract Anniversary). Fees and commissions destroy returns, especially if little or no benefit is ever paid out to your heirs. Annuities tie up your money for years and withdrawals for emergencies may incur very steep surrender penalties. We understand all these drawbacks because we see these kinds of cases every day. Never be afraid to ask for a third-party opinion. Here at Evans Law Firm, we do not give investment or tax advice but we are able to review your annuity at no cost if you believe that you or a loved one were victims of annuity fraud or suffered a financial loss as a result of an unsuitable annuity. We represent clients in Alameda County and throughout the State of California.
If you or a loved one has lost money due to death benefit or income riders, surrender charges, or other fees associated with an unsuitable annuity in Alameda County or any California county, contact Alameda County and California financial elder abuse and annuity attorney Ingrid Evans and the other attorneys at Evans Law Firm, Inc. at (415) 441-8669, or by email at <a href=”mailto:firstname.lastname@example.org”>email@example.com</a>. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a FINRA arbitration, 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.
Some of the major annuity and life insurance providers in California are listed below. We are not in any way suggesting that these carriers have been involved in any wrongdoing whatsoever. Rather, the list is provided solely for our readers’ reference.
Allianz Life Insurance Company of North America
Allstate Life Insurance Company
American Equity Investment Life Holding Company
American General Life Insurance Company
American National Life Insurance Company
Ameriprise Financial/RiverSource Life Insurance Company
Athene Annuity and Life Company
AXA Equitable Life Insurance Company
Bankers Life Insurance and Casualty Company
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Forethought Life Insurance Company/Global Atlantic Financial Group
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
Life Insurance of the SouthWest/National Life Group
Lincoln Financial Group/The Lincoln National Life Insurance Company
MassMutual/Massachusetts Mutual Life Insurance Company
Metlife/Metropolitan Life Insurance Company
Midland National Life Insurance Company
Mutual of Omaha/United of Omaha Life Insurance Company
National Life Group/Life Insurance of the SouthWest
New York Life Insurance Company
Northwestern Mutual Life Insurance Company
Pacific Life Insurance Company
Principal Life Insurance Company
Pruco/Prudential Life Insurance Company
RiverSource Life Insurance Company/Ameriprise Financial
Security Benefit Life Insurance Company/Guggenheim Partners
Transamerica Life Insurance Company
United of Omaha Life Insurance Company/Mutual of Omaha
Unum Life Insurance Company of America
Voya/Reliastar Life Insurance Company