Skip to Content

PHONE: 415-441-8669 | TOLL FREE: 888-50EVANS
Free Initial Consultation Available

Apr 5, 2021 by |

Santa Cruz County Financial Elder Abuse Attorneys: Disadvantages of Fixed Indexed Annuities For Santa Cruz Seniors

ATTORNEY NEWSLETTER

Avoid The Hype On Fixed Indexed Annuities

Complex Insurance Products With High Commissions And Fees

Replacement Transactions Especially Risky And Costly

COVID-19 has created serious uncertainty in markets and left many investors jittery about the country’s economic future and the performance of markets in the years ahead climbing out of this downturn.  Insurance agents often exploit market jitters, especially among older consumers anxious about income during their retirement years.  Often, an agent will propose a deferred annuity known as a fixed indexed annuity (FIA) with promises of guaranteed income and safety for the future.  Avoid the push of these policies and resist any high-pressure sales tactics until you understand more.  These policies are expensive and complex and costly to get out of once you’re in.  Also, if you already own an annuity, resist the pitch to trade it in for a new; these transactions are also costly and disadvantageous and may result in a big, unexpected, tax bill.  The Santa Cruz County financial elder abuse and annuity attorneys at Evans Law Firm, Inc. 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 Napa or throughout California. Call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy. 

Understanding Commissions, Contract Fees and Policy Complexity

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 but don’t buy it.  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 on whatever index fund you select. 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. 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.

Return calculations under FIAs do not work to your advantage either. First, your return will be capped at a percentage that may be less than the fund’s real return in any given year.  Second, you do not receive the benefit of reinvested dividends on the stocks in the fund as you would with a direct investment in the fund.  Third, the insurance company will also limit your gains through something called a “participation rate.” If you have a participation rate of 80%, then your investments will only grow by 80% of the amount that the index fund grew. If your goal is to invest in the stock market, then you should consider investing in an index fund on your own. 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.

Avoid Replacements or Exchanges

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

Ingrid M. Evans and the other Santa Cruz financial elder abuse and annuity attorneys at Evans Law Firm represent seniors who have been sold an unsuitable annuity, or where the agent has sold a senior on a replacement or exchange that has resulted in a loss.   If you are over age 60 and have lost money as the result of a deferred annuity transaction or surrender call Ingrid and the other Evans Law Firm attorneys at (415) 441-8669 (or toll free at 1-888-50EVANS)  or by email at <ahref=”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.

Million Dollar Advocates Forum SuperLawyers Badge Best Lawyers Badge Avvo Lawyer Badge

Our Passion For Justice

415-441-8669 888-50EVANS

Hear What Our Clients Have To Say

"Contacted Ingrid on an elder financial abuse case - she was responsive, knowledgeable, and easy to work with. You can tell she is passionate about this area of law and has the experience to back it up. She is an excellent choice if you are looking for a results driven attorney and highly effective advocate."
Posted By: Anonymous

Read More Reviews