Long-Term Contracts With Surrender Penalties
Loss Of Control Over Investments
Low Or no Interest And High Fees
Deferred annuities, such as fixed indexed annuities, are long-term, complex insurance policies which require you to lose control over your investment. Some contracts may earn little to no interest, and if you try to exit the annuity contract, you may be penalized by a surrender or withdrawal charge in the first 10 or more years of the policy. Evans Law Firm, Inc. generally recommends against deferred annuities for older consumers because of these very characteristics; deferred annuities are expensive and complicated and tie up a senior’s money for years. Agent tactics for selling deferred annuities to older persons may be aggressive and agents may try to rush a senior into a transaction or fail to provide all the information necessary to understand how a policy works. Unsuitable policies and deceptive or aggressive sales tactics may also violate legal protections for older consumers in particular. 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 Napa or elsewhere in the Bay Area or throughout 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.
Surrender Penalties, Sales Commissions, Fees And Caps
Three features of deferred annuities are main drawbacks of these contracts for seniors:
- Surrender Penalties. Carriers impose surrender (or withdrawal) charges on withdrawals prior to annuitization. Surrender periods may last seven to ten years and start at 7-10% (and sometimes more). As an example, if your annuity charges a 7% penalty for withdrawals, and you need your money back from a $200,000 annuity, it’s going to cost you $14,000 ($200,000 x 7% = $14,000) to get your own money back.
- 2. Sales Commissions And Deferred annuities, such as fixed indexed annuities, pay high commissions — often 8% or higher of the total amount. If you were sold a $200,000 annuity, the salesperson might take home $16,000 up front. Needless to say, there’s not a lot of incentive for him to put you in a low-cost index fund. Annual contract fees can also be high According to a recent Investment Company Institute (“ICI”) study, the simple average expense ratio (includes investment management and transaction fees) of equity mutual funds was 1.28 percent in 2016. Conversely, annuity fees can run in the range of 2.5 percent to 3 percent a year.
- Caps On Performance. Annuity providers determine a “cap rate,” an interest rate that limits the growth of an indexed annuity. This cap ensures that the annuity provider can meet their obligations and still make a profit on the product. But the cap works against the policyholder. Even if your chosen index grows at a significant clip your account will be credited in an amount no greater than the cap rate, which can be substantially less than the actual rate of growth in the index.
If you are over 60 and live in Napa County or elsewhere in the Bay Area or 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.