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Dec 4, 2018 by |

California and Alameda County Annuity and Financial Elder Abuse Attorney: Proposed SEC Rule Change for Variable Annuities and Variable Life Insurance

ATTORNEY NEWSLETTER

Greater Disclosures Still May Not Tell The Full Story

Variable annuities and variable life insurance contracts are expensive, complex securities sold by prospectuses and subject to regulation by the U.S. Securities and Exchange Commission (SEC).   This week, the SEC announced proposed rule changes intended to improve disclosures for investors. The changes would require easy to read summary prospectuses (similar to mutual funds) and easier access to more detailed information.  While the securities attorneys at Evans Law Firm, Inc. support any measure that gets more information to investors, when it comes to variable insurance products we’re not convinced the proposed rule changes go far enough.  

In fact, even with additional information, we recommend against these investments, particularly for seniors. Our lawyers represent consumers, especially seniors, who have lost money on variable annuities and life insurance through high commissions, hidden fees and adjustments, or withdrawal charges and tax bills as a result of surrenders and exchanges of these policies. If you or someone you know is over 60 and lives in California and has experienced that type of loss on variable annuities or life insurance in Alameda County or elsewhere in California, call us today at 415-441-8669. 

The main downsides of these contracts are: (1) you tie up your money for a long time and (2) pay high expenses. Tying up money in an illiquid investment is not a good idea for seniors who may need the money.  The policy expenses will directly impact your return under variable annuities or life insurance include:

  • Sales Load: most carriers charge an upfront fee to pay a sales commission to the broker who sold you the contract. Paying an upfront commission of 7-10% can really decimate any potential growth.
  • Surrender charge: If you need your money back, you pay a hefty fee of as much as 10-15% in the early years of your policy.
  • Mortality and risk expense: This expense is known as the cost of insurance and is based on life expectancy assumptions. To offset the risk that you outlive those assumptions you will be charged around 1.15-1.5% annually.
  • Administration fee: Many carriers take on an additional fee of .15-.50% a year to administer your policy.
  • Contract fee: This upfront fee varies but $35-50 is common on annuities under $100,000.
  • Investment fees: These so-called subaccount fees are not listed in the product description but are charged by the individual funds you select for investment of your premium dollars.

When you factor in all of these fees you are looking at 2.3-3.0% or more every year, which significantly reduces any return. Additional feature or “guarantees” are sold as riders and these so-called enhancements increase your expenses even more. Some of these income enhancements or “guarantees” disappear entirely if you make a withdrawal.  All of the fees incurred is money down the drain when that happens.  Bottom line is that these investments are expensive and complicated.  You may never reap the additional benefits you’ve paid for and, at best, returns may lag any return on a straight mutual fund investment. Always run any proposed contract and the numbers by a professional investment advisor with nothing to gain from your purchase.

Contact Us

If you or a loved one been the victim of annuity fraud in Alameda County, or in any California county, contact Ingrid M. Evans and the other Evans Law Firm securities, annuity and financial elder abuse attorneys at (415) 441-8669, or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</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.  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

Brighthouse Financial, Inc./MetLife

Citigroup Global Markets, Inc.

Crump Life Insurance Services, Inc.

CUNA Mutual Group/CMFG Life Insurance 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

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.

National Western Life Insurance Company

Nationwide Life Insurance Company

New York Life Insurance Company

North American Company for Life and Health Insurance

Northwestern Mutual Life Insurance Company

Oxford Life Insurance Company

Pacific Life Insurance Company

Principal Financial Group

Prudential Life Insurance Company

Raymond James Insurance Group

RiverSource Life Insurance Company/Ameriprise Financial

Securities America, Inc./Ameriprise Financial

Security Benefit Life Insurance Company/Guggenheim Partners

Symetra Life Insurance Company

Transamerica Life Insurance Company

Unum Life Insurance Company of America

Voya/Reliastar Life Insurance Company

Wells Fargo Advisors

World Financial Group Insurance Agency, Inc.

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