Understanding Riders in Annuities
The Death Benefit Rider Sales Pitch
Riders are endorsements added to annuity contracts sold to enhance the benefits payable under those contracts. There are several types of riders, two of the most common being income riders and death benefit riders. We have written on numerous occasions in this column about income riders. The subject this time is death benefit riders. We believe you should understand how they work.
Chances are, if an agent has pitched you on a deferred annuity as a retirement savings vehicle, he or she promoted its “death benefit” as an additional 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 may try and convince you the cost is worth it. The San Francisco and California annuities attorneys at Evans Law Firm, Inc. 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 is over 60 and live in California and has lost money due to death benefit or income riders, surrender charges, or other fees associated with an annuity, call the San Francisco and California financial elder abuse and annuities lawyers today at Evans Law Firm, Inc. (415) 441-8669 and we may be able to help.
What’s Wrong with Death Benefit Riders?
The basic death benefit offered under a deferred annuity is a guarantee that after your death, the insurance company will pay your beneficiary at least the amount you put in (reduced by whatever you have taken out). But that doesn’t sound like much of a benefit, so most carriers offer an “enhanced” death benefit as well – for a fee. Enhanced 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. If you have too many extra riders on your variable annuity, the fees can add up to 3.5 percent to 4 percent a year. High fees make it almost impossible for the investments to perform well enough to earn back the fees and grow, so be cautious about adding features that you don’t really need. Also, the death benefit may be lost (or, at a minimum, reduced) when you annuitize (accept the income stream you were promised in the first place), make a withdrawal, cancel, or surrender the contract (and likely incur a surrender penalty).
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
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.
 We represent clients who have suffered financial losses on annuities but we do not offer investment or tax advice.