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May 21, 2021 by |

Los Angeles and Orange County Financial Elder Abuse Attorney: Older Consumers And Deferred Annuities


Deferred Annuities Not A Prudent Investment For Seniors

Dangers In The Details

Beware Of High Surrender Charges

Deferred annuities come in various forms, but insurance agents target senior consumers with one type of deferred annuity in particular known as the fixed indexed annuity (FIAs) marketed under different trade names depending on the issuing carrier and the companies the agent represents.  FIAs are sold as sources of safe, “guaranteed” income for the future; agents may induce you to liquidate other investments or exchange an existing annuity for this “safe” opportunity.  Do not let yourself be pressured into any sale. We at Evans Law Firm, Inc. advise against FIAs (and other forms of deferred annuities) for seniors because they are expensive, complex and costly to get out of once you’re in.  Agents receive substantial commissions on any sale or exchange of FIAs or other annuities.  If the agent recommends an exchange of an existing contract, the transaction may result in surrender penalties on the old policy and large, unexpected, tax bills as a result of the surrender.  Evans Law Firm, Inc. represents individuals over 60 here in Los Angeles or Orange County or elsewhere in California who have suffered a loss due to cancellation, replacement, full or partial surrender, or high fees connected with a deferred annuity or other unsuitable insurance product. Call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy. 

Commissions, Fees, and Surrender Charges

Whenever an agent sells you a new contract or convinces you to replace an existing contract, he or she will receive a commission on the transaction.  Sometimes, the commission is as high as 10%; that’s your money taken right off the top and put into someone else’s pocket. The agent may try and convince you that a “premium bonus” under the contract will essentially reimburse you for that expense but.  Premium bonuses are marketing gimmicks and you may never withdraw or receive the promised “bonus” back.  FIAs also have administrative fees, mortality and expense fees, rider fees for enhancements to policies, and subaccount fees charged against your return. Combined these fees can run as high as 2-3% and will erode or wipe out any return you may expect on your money. But the biggest danger for senior buyers is surrender charges which the carrier applies whenever you make more withdrawals than you’re allotted. Your insurance company could limit withdrawals particularly during the early years of your contract. Surrender fees are often as high as 15% and can apply for periods up to ten years or more. If you want to move your money to another investment or need it for an emergency, the surrender charge will reduce the amount you receive.

Understand How Return Calculations Work

Returns on any premium dollars you put into FIAs are determined by methods that do not benefit you.  First, returns are capped at a percentage which will be less than the fund’s real return in any given year; so, for example, if a selected index fund grows by 12%, your gain may be capped at 7% and you are denied the true growth in the index.  Second, dividends on the stocks in the fund are not reinvested as with a direct investment in the fund; reinvested dividends are a major source of growth in any stock fund and the “power” of reinvested dividends is lost to you in an FIA.  Third, any gains you receive are limited by the policy’s “participation rate.”  For example, if you have a participation rate of 80%, your investments will only grow by 80% of the amount that the index fund grew. Direct mutual fund investments do not carry these caps and limitations, and if you make your mutual fund investment through an IRA or other tax-deferred vehicle, you will also reap the benefits of tax deferral.  Annuity investments on the other hand, always have tax consequences so never buy or surrender or replace an existing annuity without first consulting your tax advisor.

Replacements or Exchanges Are Costly

California law forbids insurance agents from recommending an exchange of an existing annuity for a new one if the transaction “requires the insured to pay a surrender charge for the annuity that is being replaced, where purchase of the annuity does not confer a substantial financial benefit over the life of the policy to the consumer, so that a reasonable person would believe the purchase is unnecessary.” Cal. Ins. Code § 10509.914(c)(emphasis added).  Our financial elder abuse and annuity litigators have represented senior consumers in many cases where an agent has talked a senior into an exchange or replacement of an existing contract and the senior has suffered serious economic injury as a result of surrender charges on the existing policy and heavy tax liability for the surrender.  Never agree to any exchange, replacement or surrender of an annuity without consulting your tax advisor.

Contact Us

If you are over age 60 and have lost money as the result of a deferred annuity transaction or surrender call Ingrid M. Evans at (415) 441-8669 (or toll free at 1-888-50EVANS)  or by email at <ahref=””></a>..

Some significant issuers and distributors of 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.  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


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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