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Apr 15, 2021 by |

Marin County Financial Elder Abuse Attorneys: Fixed Indexed Annuities And Unsuitable Insurance Products For Older Consumers


Agents Oversimplify How Deferred Annuities Work

The Dangers For Seniors Are In The Details

Exchanging Existing Annuities Can Be Very Costly

Deferred annuities come in various forms, but one of the products insurance agents promote for seniors are fixed indexed annuities (FIAs).  Agents sell FIAs to seniors in particular as sources of safe, “guaranteed” income for the future. The litigators at Evans Law Firm, Inc. advise against these policies for seniors because they are expensive, complex and costly to get out of once you’re in.  If a senior consumer already owns an annuity, an agent may suggest the policyholder trade or exchange that contract for a new one.  An agent receives a commission on an exchange but the potential cost for the policyholder are serious because these transactions can result in surrender penalties on the old policy and large, unexpected, tax bills.  Our Marin financial elder abuse and annuity attorneys represent individuals over 60 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 here in Marin or throughout California. Call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy. 

Sales Commissions, Contract Fees and Surrender Charges

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 for that expense but. Bonuses are 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.

Insurance carriers calculate returns under FIAs by methods that do not benefit you. First, policy returns are capped at a percentage which will be less than the fund’s real return in any given year.  Second, dividends on the stocks in the fund are not reinvested as with a direct investment in the fund.  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 and the other Evans Law Firm attorneys 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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