ATTORNEY NEWSLETTER
Complex, Costly Insurance Contracts
Locked In By High Exit Costs
Investment Risk Is Not Insured Against
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. Even if you are able to wait out the surrender period (which can be 10 or more years), the upfront sales commission (taken out of your premium) and annual fees diminish the return on your money. Further, market changes during the surrender period may drive you to move your money out of the annuity; to do so, however, you will have to pay a surrender charge and face a tax liability. 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 the San Francisco Bay Area 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.
Disadvantages Of Annuities
- High expenses. One of the knocks on many annuities are the high expenses on the contracts such as the upfront sales commission, annual administrative fees, cost of insurance charges, rider fees and other annual costs against your premiums. Taken together, these fees erode returns on your premium dollars, especially on an indexed or variable annuity where the value is dependent on the investment returns in the contract’s sub-accounts. Some contracts are so complex that the full rate of the internal expenses is hard for the average investor to ascertain and understand.
- Costly to exit. Some insurers make it difficult to exit an annuity contract by imposing high surrender charges or penalties. Surrender charges might amount to 10 percent or more of the value of the contract in some cases. There is a surrender period which can vary in length and sometimes be as long as 15 years. With such a contract, if you are sold a policy at age 70 you will be 85 before you can withdraw your money without a surrender charge. If you financial situation, medical emergency, or rising care costs force you to withdraw your money you may suffer a significant loss. Also, withdrawals are subject to income tax at ordinary tax rates in most cases.
- Possibility of an insurer defaulting. Annuities are only guaranteed by the insurance company who issues the contract; there is no FDIC or other insurance covering your investment even if the annuity is sold to you by a bank representative. Annuities are not like CD’s or other federally insured bank deposits. While there have not been a lot of defaults on annuities, this can happen. The backup to the insurance company is the guaranty association in your state. It is a good practice to check on the financial solvency of an insurer before investing in any annuity contract.
Contact Us
If you are over 60 and live in the San Francisco Bay Area 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.
