Understanding These Complicated, Long-Term Insurance Policies
Commissions, Fees And Surrender Penalties
Dangers In Replacements And Exchanges Of Contracts
Evans Law Firm, Inc. recommends against annuities for older consumers because these complex, expensive forms of insurance tie up a senior’s money for years and impose significant penalties if you need your money back. Even if you are able to leave your money in these contracts, the upfront sales commission (taken out of your premium) and annual fees will diminish any return on your money. Deferred annuities are so complex that it is doubtful some agents even understand how they work and may not themselves be in a position to provide you all the information you need to understand these contracts. Questionable or incomplete sales tactics and presentations and the policies themselves may constitute violations of insurance laws and elder protections. Cal. Weld. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. § 790 et seq. (Unfair Insurance Practices Act). Senior victims may sue for damages and other relief including awards of attorneys’ fees and expenses for bringing your case. Cal. Welf. & Inst. Code § 15657.5. If you are over 60, live in Los Angeles or elsewhere in the State of California and own a deferred annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Commissions and Fees
Any agent who sells you a new contract or convinces you to replace an existing contract will receive a sales commission as high as 10% on the transaction. The agent may try and convince you that a “premium bonus” under the contract will essentially reimburse you but don’t buy it. Bonuses are gimmicks and you may never withdraw or receive the promised “bonus” back. Contracts also have administrative fees, mortality and expense fees, rider fees for enhancements to policies, and subaccount fees charged against your return on whatever index fund you select. Combined these fees can run as high as 2-3% and will erode or wipe out any return you may expect on your money.
The greatest danger for senior buyers of deferred annuities, however, are surrender charges. A surrender charge applies when 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.
Replacements or Exchanges
One other real snare is when an agent insists a senior should replace his or her existing annuity for a “better” one. 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.
If you are over 60 and live in Los Angeles or elsewhere in the State of California and have a deferred annuity or universal life insurance contract, we can review your contract for free. You can reach Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669, or toll free at 1-888-50EVANS or by email at <a href=”mailto:email@example.com”>firstname.lastname@example.org</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
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.