ATTORNEY NEWSLETTER
Long-Term Insurance Policies Are Complicated
Penalties For Getting Your Money Back
Commissions And Fees Diminish Returns
Deferred annuities are contracts where the policy holder makes an upfront premium payment in exchange for an income stream in years to come. The concept sounds simple enough but in fact deferred annuities, like fixed indexed annuities, are extremely complicated insurance contracts sometimes running to 50-100 pages of technical language and actuarial tables. Seniors are often targeted by insurance agents with proposals for deferred annuities. If an agent sells you “enhancements” to the policy, known as “riders,” the contracts will be even longer – and more costly. 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). If you are over 60, and live in Burlingame or elsewhere in San Mateo County or Northern California and would like us to review your annuity contract, call us today at 415-441-8669 (or toll free at 1-888-50EVANS).
Downsides of Annuities
Surrender Penalties
There is a lack of flexibility and liquidity with deferred annuities which, when broken, can incur high fees. 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
One reason brokers favor annuities is that they can make upwards of 10% in commission off the principal, which can mean a $10,000 payday on a $100,000 annuity sale, with fees increasing the more the annuity is amended and customized. The upfront 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
One final sticking point with annuities is that they’re primarily bought through insurance companies, which are not backed by the federal government in the same way that banks are. (Even if a bank representative is offering you the annuity it will not be an insured deposit like CDs or other bank deposits.) Because there is no FDIC insurance behind an annuity purchase, if the insurance company happens to fold, you risk losing everything you invested.
Contact Us
If you are over 60 and live in Burlingame or elsewhere in San Mateo County or Northern 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: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
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
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.
