Complex And Expensive Insurance Policies
Deceptive Sales Practices
High Commissions, Fees And Policy Expenses
A deferred annuity is an insurance contract between you and an insurance company. You buy the annuity by making one or more premium payments to the insurance company. The insurance company promises to make income payments to you in the future. Annuities usually have commissions and other fees that cut into your investment, and typically earn less money than stocks and bonds. Evans Law Firm, Inc. generally recommends against deferred annuities, including fixed indexed annuities, for older consumers because sales commissions and annual fees on these policies are high; the return on your money rarely meets expectations (we have seen contracts produce zero returns even in strong markets); and you are penalized for any withdrawal, effectively tying up your money for years. Once you’re sold an annuity it is very expensive to get out. If you want to switch investments or just access your own money when you need it, you will pay a penalty. Although we do not give tax advice, tax issues are important when it comes to annuities and you will always want to consult your own tax advisor beforehand regarding any annuity transaction because all annuity transactions have tax consequences. If you are over 60, and live in the San Francisco Bay Area or elsewhere in California and have experienced an economic loss as a result of the sale of an unsuitable annuity or other investment product, including a fixed indexed annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS).
Do Not be Pushed into Buying an Annuity
- An agent should not push you to buy an annuity. That’s illegal.
- Do not get a reverse mortgage so you can buy an annuity. It is illegal for an agent to sell you an annuity with proceeds from a reverse mortgage.
- The law says that anyone who offers to sell you an annuity must give you honest and accurate information on the terms and rules of the annuity, and its costs and benefits.
Costs And Limitations on Your Return
Annuity carriers impose withdrawal penalties, commonly called surrender charges, on amounts you withdraw from an annuity while the annuity is in the “surrender period” before annuity payments begin. Surrender periods can last up to ten or more years under some contracts and the withdrawal penalty may be 10% or greater on withdrawals made in early years of a contract.
Participation rates or rate caps act to limit your return:
- Participation rate:Let’s say the S&P 500 grows by 10% in a year and your contract has a 60% participation rate. The annuity company will then take that 10% growth and give you 60% of it, which would equal 6%.
- Rate cap: In this scenario, let’s assume the S&P 500 grows by 8% over a year, and your contract has a 5% rate cap. The result would be that your contract receives a 5% return, since the rate cap limits how much your contract can earn.
Policy Expenses Add Up
Layers of fees obscure an annuity’s real cost and reduce how much it pays out. The following are common annuity expenses you should be aware of:
- Mortality and expense fee
- Administrative fee
- Contract maintenance charge
- Subaccount fee
- State premium tax (2.35% in California paid by the carrier but passed on to consumers through insurance rates)
- Investment transfer fee
- Principal protection
- Inflation protection/cost-of-living adjustment
- Long-term care rider
- Lifetime income rider
If you are over 60 and live in the San Francisco Bay Area or elsewhere in California and have lost money on a deferred annuity or indexed universal life insurance contact 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:firstname.lastname@example.org”>email@example.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
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.