Annuities Are Expensive, Complicated Insurance Policies
Agents Earn High Commissions On Your Premium Dollars
Surrender Penalties Make Getting Out Costly
Fear tactics are one way insurance agents use to sell annuities. Print and radio ads may warn senior readers or audiences about the perils of the stock market or coming economic freefall in an attempt to instill panic. Resist this kind of fearmongering when making any investment decision and especially if the product being promoted is a deferred annuity. Deferred annuities (whether variable, fixed or a hybrid of the two sold as “fixed indexed”) are complicated and expensive insurance products with significant risks for seniors. Besides the expense of these insurance policies the special risk for seniors is this: if a senior needs his or her money back for an emergency or because their care expenses have increased, the withdrawal will be subject to a sizeable withdrawal penalty, also known as a surrender charge. Evans Law Firm, Inc. recommends seniors avoid deferred annuities because of this inherent risk and because sales commissions and contract fees are high and returns are routinely not as high as advertised “teaser” rates or sales illustrations may suggest. We have seen many seniors lose money on deferred annuities over our years representing victims of financial elder abuse. If you have already been sold an annuity and you’re over 60 and live in Marin County, San Francisco or elsewhere in the Bay Area or anywhere in California and have suffered a loss due to cancellation, replacement, fees, or full or partial surrender of a deferred annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
High Sales Commissions And Contract Fees
Whenever an insurance agent sells an annuity or convinces a policyholder to exchange an exiting policy for a new one, he or she earns a significant sales commission. This commissions can run as high as 10% and comes directly out of your initial premium payment. If the agent tells you the policy’s “premium bonus” will return that money to you over time, don’t buy it. These “premium bonuses” are essentially phantom amounts that you will most likely never see. The bonus is never, ever, an amount of money you can withdraw to pay yourself back for the commission outlay. If down the road on a contract you need to make a withdrawal or surrender the contract to get your money back, the “bonus” simply disappears. In addition to the sales commission, contracts also include administrative fees, mortality (or insurance) expense fees, rider fees (for policy enhancements) and subaccount fees (on your chosen index) that all reduce returns. Your return may also be subject to a cap and a participation rate both of which act to reduce any return that you otherwise could have received if you had just invested your money in the chosen index directly. In short, deferred annuities are expensive.
Withdrawals And Exchanges
Charges on withdrawals pose any even greater potential problem for seniors than commissions and fees. Surrender penalties decrease withdrawals of your own money. Surrender periods can last for ten years or more and the percentage penalties can be as high as 15% of the amount you need to withdraw. If you had the same investment in a direct mutual fund, you would not be penalized if you decided down the road to switch investments. Annuities in other words lock you in. That’s a problem too. If you do stay in, the fees, caps, and participation limits will cut into your return. Whatever you do, always consult a professional with nothing to gain from a sale before you buy and always consult your tax advisor because any decision regarding annuities has ta consequences. If an agent recommends replacing your existing contract, be extra careful. Those kinds of transactions can trigger large tax liabilities, incur surrender charges, wipe out “bonuses,” and reset the clock on your surrender penalty period under the new policy.
If an agent does present you with an annuity proposal, think long and hard about it and consider the following:
- Pay attention to annual maintenance costs.
- Avoid signing up for a premium bonus, because you will typically pay for this with surrender charges in the long run.
- Understand liquidity issues with owning an annuity, as withdrawals come with fees and IRS tax penalties.
- Talk to a tax professional and don’t mistake tax deferment to mean no taxes.
- Be aware that agents will get higher commissions for variable annuity sales (annuities tied to market fluctuations).
- Have a trusted friend, relative or attorney present when reviewing and signing policies.
If you or a loved one has suffered loss on the surrender, termination or transfer of an annuity in Marin County or elsewhere in California call Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669 (or toll free at 1-888-50EVANS) or by email at <ahref=”mailto:email@example.com”>firstname.lastname@example.org</a>. Evans Law Firm, Inc. also handles 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 International Group, Inc. (AIG)
American National Life Insurance Company
Athene Annuity & Life Assurance Company
Athene Annuity and Life Company
Aviva Life Insurance Company
AXA Equitable Financial Services, LLC
AXA Equitable Life Insurance Company/AXA US
AXA Advisors, LLC
Brighthouse Financial, Inc./MetLife
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Genworth Financial, Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Company
Guggenheim Partners, LLC
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
Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.
Minnesota Life Insurance Company
Nationwide Investor Services Corporation (NISC)
Nationwide Life and Annuity Insurance Company
Nationwide Life Insurance Company
New York Life Insurance Company
Northwestern Mutual Investment Services, LLC
Northwestern Mutual Life Insurance Company
Northwestern Mutual Wealth Management Company
Pacific Life & Annuity Company
Pacific Life Insurance Company
Security Benefit Corporation
Security Benefit Group, Inc.
Security Benefit Life Insurance Company/Guggenheim Partners
Security Investors, LLC
Security of Denver Life Insurance Company/Voya
Transamerica Life Insurance Company
Voya Financial Advisors
Voya/Reliastar Life Insurance Company
World Financial Group Insurance Agency, Inc.