Complicated And Expensive Contracts
Costly to Exit
Investments Are Not Insured
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. Sales and recommended surrenders and exchanges of deferred annuities to seniors may constitute financial elder abuse claims under Cal. Welf. & Inst. Code §§ 15610.30 (definition of financial elder abuse) and Cal. Ins. Code §10509 (suitability requirements for annuities). Questionable sales tactics, like unannounced home visits, “pretext” visits or falsified applications, are illegal. See, e.g., Cal. Ins. Code § 790 et seq. (Unfair Insurance Practices Act).
Aggressive tactics by insurance carriers, increasingly owned by private equity firms, have some analysts worried. As one analyst put it:
Private equity firms have gotten into the business, buying public insurance players or starting new private ones, and now represent 10% of the sector. Both new and old insurance companies are using more leverage and expanding their holdings of exotic assets such as collateralized loan obligations and reinsurance contracts to fund annuities. In addition, insurers are offering greater liquidity to investors, raising the risk of bank-run-type disasters for the companies.
All these changes could lead to a race to the bottom where the most aggressive companies offer the highest annuity rates, win a bigger share of new business, chase the riskiest strategies to fund them and, eventually, collapse first. A big enough collapse could cause systemic problems in the financial system. It’s not clear that state insurance regulators can keep up with the changes.
If you are over 60, and live in Santa Barbara or elsewhere in Southern California and would like us to review your annuity contract, call us today at 415-441-8669 (or toll free at 1-888-50EVANS).
Specific Downsides of Annuities
When you put a lump sum into an annuity, essentially you’re surrendering your money for the term of your contract. If you’ve invested $100,000 in a deferred annuity that isn’t set to pay out for 10 years, but after five you need $50,000 back for an emergency, that withdrawal can incur a penalty. You will also incur a tax liability and annuity withdrawals may be taxed at ordinary income tax rates not the lower capital gains rate.
Commissions and Fees
The upfront sales commission is not the only cost associated with many deferred annuities; there are also annual administrative fees and “rider” fees (for policy enhancements) that can quickly erode your annual return on the premium dollars you invested.
Not Insured Investments
Annuities are not backed by the federal government in the same way that banks are. Because there is no FDIC insurance behind an annuity purchase, if the insurance company happens to fold, you risk losing everything you invested.
If you are over 60 and live in Santa Barbara or elsewhere in Southern California and would like a free review of your policy contact Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669 (or toll free at 1-888-50EVANS), or by email at <ahref=”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
Nationwide Mutual 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.
 “Annuities Are Back in Fashion, But Are They Safe?,” Aaron Brown, wealthmanagement.com, Nov. 27, 2023.