ATTORNEY NEWSLETTER
Surrender Penalties Lock You In
Costly Exits
Other Disadvantages Of Deferred Annuities
Deferred annuities require a long-term commitment of your money to the insurance carrier issuing the policy and impose penalties on getting your money back for years. Life changes or changes during this waiting period (known as the “surrender period”) may influence you to move your money out of the annuity, but to do so you will have to pay a surrender charge and face a potential tax liability. 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. Further disadvantages for seniors are low returns, high commissions, annual fees and administrative charges, and the long delay (surrender period) before you will ever receive any income payments. Annuities may be sold based on incomplete information about these withdrawal consequences or other contract pitfalls. Questionable or incomplete sales tactics and presentations and the policies themselves may constitute violations of insurance laws and elder protections. Cal. Welf. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. § 790 et seq. (Unfair Insurance Practices Act). Relief for injured seniors includes 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 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.
Reasons Why You Might Want To Get Out Of An Annuity
Annuities are meant to be long-term financial products, but there are several reasons you might consider leaving your annuity:
- Major life event or change in plans: Unexpected medical bills, job loss or a change in your retirement timeline may make it necessary to access your funds sooner than expected.
- Fees and expenses: Some annuities come with high fees that eat into your returns. If you find a better investment opportunity with lower costs, exiting your annuity might be worthwhile.
- Performance concerns: If your annuity isn’t performing well compared to other investment options, you might want to explore alternatives.
Costly Exits And Other Disadvantages
There are a number of features that bear scrutiny with these complicated insurance contracts. Three features of particular concern for senior 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. Direct mutual fund investments do not penalize withdrawals.
- Sales Commissions And Deferred annuities are expensive. First, a selling agent receives a significant commission on the sale of the contract to you which can be around 8%. That comes straight out of your premium. Yearly expenses can be high too.
- Participation Rates And Caps On Performance. Carriers will typically impose a “participation rate” set below 100% so if the index you chose increases you will not get a 100% of that return, but a lower percentage. Annuity providers also determine a “cap rate,” an interest rate that limits the growth of an indexed annuity.
Contact Us
If you are over 60 and live in Alameda County 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.
