Are Indexed Annuities Just Over-Our-Heads Difficult?
Annuities are complex financial instruments. So-called indexed annuities are even more complicated. Yet, these investments are made quite often, which means people could be investing in a product they simply do not understand. And the stakes are incredibly high; often the premiums for these kinds of annuities start in the six figures.
What Is So Tricky
Indexed annuities are similar to other indexed investments such as you may have your retirement savings in. A portion of your premium goes into a fixed investment that protects you in a down market and the balance is tied to some kind of index like the S&P 500. If you’re comfortable with the projected over-all return on the product, then the real incentive is the tax deferral of that return. So far, so good. But things get complicated quickly when it comes to the details of how the product actually works over the set term. When it comes to those details, indexed annuities have a language all their own: caps, participation rates, margins, spreads, bonuses, riders, market adjustment, surrender penalties. In fact, the more you go into the details of these indexed contracts, the more apparent it is that they may not be such a good deal after all. After commissions, fees, withdrawal penalties, adjustments and other charges, the real rate of return may be much, much lower than you think. And don’t be fooled by a “cap” on your return that implies you might see a yield just beneath it. That isn’t how it works! Conversely, uncapped contracts might tempt you to think you can earn more. That’s not how those contracts work either. Look deeply into the returns you’re being offered. Examine the prospectus carefully. Ask for, and demand, a full explanation of all commissions and fees; inquire about “market adjustments” and riders that may substantially impact your return on investment. And – most importantly – find out what happens if you need to take your money out. Find out for each year of the contract as the penalties and charges vary and often never go away.
How To Read Through It
The importance of a good, disinterested advisor in Los Angeles or elsewhere cannot be overstated. This products are tricky and extremely complicated; they don’t work out as smoothly as the promotional literature often suggests. Be careful and act slowly and prudently. Think long and hard about your future cash and income needs. Find the investments that suit you best.
Some of the major annuity and life insurance providers in California are:
- Aviva/Athene/Accordia Life Insurance Company
- Transamerica Life Insurance Company
- John Hancock Life Insurance Company
- Bankers Life Insurance and Casualty company
- Massachusetts Mutual Life Insurance Company
- Midland Life Insurance Company
- North American Company for Life and Health Insurance
- Pacific Life Insurance Company
- Prudential Life Insurance Company
- Genworth Life Insurance Company
- ING USA Annuity and Life Insurance Company
- Lincoln Benefit Life Company
- Metlife/Metropolitan Life Insurance Company
- Unum Life Insurance Company of America
- Voya/Reliastar Life Insurance Company
The Financial Industry Regulatory Authority is the largest independent regulator for all securities firms doing business in the United States, and aims to protect investors by making sure the United States securities industry operates fairly and honestly. FINRA operates the largest arbitration forum in the United States.
If you have questions regarding an annuity you have purchased, call the Evans Law Firm, for a free and confidential evaluation and review of your policies to determine your legal rights.
Evans Law Firm, Inc. handles annuity fraud and insurance fraud cases and lawsuits in Los Angeles, CA and in all other counties in California as well. If you have purchased an annuity policy, or are considering purchasing one, and would like to know whether it is a suitable investment for you, contact Evans Law Firm, Inc. at 415-441-8669 or via email at firstname.lastname@example.org.