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May 6, 2022 by |

Orange County Financial Elder Abuse And Annuity Attorney: Disadvantages Of Certain Forms Of Deferred Annuities

ATTORNEY NEWSLETTER

Deferred Annuities Are Complicated, Long-Term Insurance Policies

Commissions, Fees And Surrender Penalties Erode Returns

Replacements And Exchanges Of Contracts Can Be Costly

Evans Law Firm, Inc. generally recommends against certain types of deferred annuities for older consumers because these complex, expensive insurance policies may 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, the upfront sales commission (taken out of your premium) and annual fees may diminish the return on your money.  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 Orange County 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. 

Surrender Charges

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.

Commissions and Fees

Any agent who sells you a new contract or convinces you to replace an existing contract likely receives a sales commission.  Sales commissions can run as high as 8-10% 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” as a lump sum back (unlike the way the agent got paid).  There are also administrative fees, mortality and expense fees, rider fees for enhancements to policies, and subaccount fees in many forms of deferred annuities and these fees further diminish returns. Combined these fees can run as high as 2-3% and will erode or wipe out any return you may expect on your money.

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.

Contact Us

If you are over 60 and live in Orange Countyor 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:info@evanslaw.com”>info@evanslaw.com</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

PacLife

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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