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Oct 31, 2018 by |

California and San Francisco Annuity and Financial Elder Abuse Attorney: Riders in Annuities

ATTORNEY NEWSLETTER

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.[1]

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

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.

[1] We represent clients who have suffered financial losses on annuities but we do not offer investment or tax advice.

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