ATTORNEY NEWSLETTER
Be Wary Of Indexed Annuity Proposals
Understand The Surrender Penalties And Fees
Caps On Returns
Evans Law Firm, Inc. generally recommends against deferred annuities for older consumers because they are expensive and complicated and because these contracts tie up a senior’s money for years. Many deferred annuities impose significant surrender penalties if you need your money before the annuitization phase kicks in; surrender penalties can be as high as 10% or more and last for up to ten or more years into a contract. Sales tactics for these policies may be aggressive and agents may try to rush a senior into a transaction or fail to provide all the information necessary to understand how a policy works. The policies are so complicated that the selling agent may not understand how it works. Unsuitable policies and deceptive or aggressive sales tactics may also violate legal protections for older consumers in particular. 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 Alameda County or elsewhere in the Bay Area or throughout 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 Penalties, Fees And Caps
There are a number of features that bear scrutiny with these complicated insurance contracts. Three features of particular concern for seniors policyholders are:
- Surrender Penalties. A surrender charge is a fee assessed on investors assets if they move money out of a deferred annuity. The surrender charges are often 5 to 7 percent of assets in year one and decline one percent a year until they go away over the next 5 to 7 years. If an older person needs their money for an emergency or because their living and care expenses have increased beyond what they expected, will be penalized by an early surrender of their contract. Direct mutual fund investments do not penalize withdrawals.
- Fees. Deferred annuities are expensive. According to a recent Investment Company Institute (“ICI”) study, the simple average expense ratio (includes investment management and transaction fees) of equity mutual funds was 1.28 percent in 2016. Conversely, annuity fees can run in the range of 2.5 percent to 3 percent a year. If an agent sells you additional policy features, known as “riders,” you will pay more for those too, and your return may be eroded by another 1-2% or more annually.
- Caps On Performance. Annuity providers determine a “cap rate,” an interest rate that limits the growth of an indexed annuity. This cap ensures that the annuity provider can meet their obligations and still make a profit on the product. But the cap works against the policyholder. Even if your chosen index grows at a significant clip your account will be credited in an amount no greater than the cap rate, which can be substantially less than the actual rate of growth in the index.
Contact Us
If you are over 60 and live in Alameda County or elsewhere in the Bay Area or 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.
