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.
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: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.