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Jul 6, 2021 by |

California and Marin County Financial Elder Abuse Attorneys: How Seniors Can Lose On Deferred Annuities

ATTORNEY NEWSLETTER

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.

Consumer Considerations

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.

Contact Us

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:info@evanslaw.com”>info@evanslaw.com</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

Athene USA

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

PacLife

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.

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