ATTORNEY NEWSLETTER
Although insurance agents and companies often pitch the benefits of deferred annuities, it is important for consumers, particularly elderly consumers, to be aware of the risks as well.
First, consumers should be aware of some of the marketing and sales schemes used to sell annuities. If you have been offered a free-lunch seminar involving retirement planning or free estate planning, you should be wary of their motives. An agent may also visit the home of a potential customer, or bill themselves as a Certified Senior Advisor or expert in senior financial planning.
Some of the disadvantages of deferred annuities include surrender charges, forfeiture charges, charges at death, and teaser interest rates. Surrender charges are penalties that are incurred when the consumer tries to surrender the policy or make withdrawals before a certain date. These penalties can be as high as 25%, and the early withdrawal period may last 10-15 years—making it a particularly illiquid investment for senior citizens. Forfeiture charges are similar, and annuities may be sold with the promise of extra bonuses or returns in interest, but with the caveat that the policy-holder must hold onto the policy for a certain period (say, 15 years). Deferred annuities can also offer a death benefit when the policy holder dies, but policies may penalize heirs or the estate. Agents also often offer “teaser interest rates,” meaning a high rate of return in the first year of the policy as an enticement, only to drop to a much lower rate after that first year.
There can also be hidden costs involved in an annuity policy. Consumers may be paying for up the agent’s commission, or paying extra bonuses through lower interest rates in later years of the policy. The illiquidity of a policy can also cost consumers, as they will be penalized should they withdraw money before the surrender period ends.
Consumers should also know that titles such as “Certified Senior Advisor” often reflect little to no real qualifications or training. Consumers should always carefully research any products that they are considering purchasing, and get an opinion from an independent financial advisor.
Transamerica Life Insurance Company is one such company that sells deferred annuities. They offer various annuity and insurance products. Transamerica designates itself as “one of the world’s leading financial services companies.” Through Transamerica, consumers can utilize deferred (fixed and indexed) and variable annuities as part of their financial planning strategy.
Evans Law Firm, Inc. handles annuity fraud and insurance fraud lawsuits, as well as other consumer fraud and financial exploitation cases, and is currently investigating potential claims related to the sale of annuities through Transamerica Life Insurance. If you have purchased, or are considering purchasing, an annuity policy through Transamerica and want to know if it is a suitable investment for you, please contact Evans Law Firm, Inc. at 415-441-8669 or via email at info@evanslaw.com.
