ATTORNEY NEWSLETTER
Complex, Costly Insurance Contracts
Locked In By High Exit Costs
Investment Risk Is Not Insured Against By FDIC
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.
Investment Risk
In addition to the disadvantages of high fees and costly withdrawals, there is also an investment risk inherent in every annuity. Annuities are not insured by the FDIC, even if you purchase an annuity from a bank. One recent case example, the subject of a recent Barron’s article[1], illustrates the investment risk in annuities. The brochure for one insurance company’s annuity plans pitches the product as suitable for savers with “low tolerance for risks”: people who “typically invest in CDs, savings bonds, money-market funds, and Treasury bills.” According to the Barron’s article, however, the policies might not be as secure as the firm’s marketing suggests. The firm’s insurers invested heavily in businesses that fall under the parent company’s control, raising potential conflicts of interest, a Barron’s investigation has found. According to the article, the carrier disclosed more than $400 million worth of loans to companies that Barron’s could not find documented outside of the company’s own filings.
According to the Barron’s article, the profit-centered, risk-tolerant mind-set increasingly prevalent across the industry is an awkward fit, given that annuities are looked to for safe and steady returns, says forensic accountant Tom Gober. “The people driving the investment decisions are not the traditional lifelong executives who care about policyholders for the long term,” says Gober, who has briefed the U.S. Department of Labor and the Senate Banking Committee on the changing life-insurance landscape. Life insurers have increasingly invested in so-called private placements, generally higher-yielding securities that are exempt from federal reporting requirements and lack active secondary markets, said the Federal Reserve Bank of Chicago in a June 3 report. “The growing investment in this less liquid asset class therefore increases the risk of fire sales during times of crisis,” wrote the Fed analysts. While states guarantee the life insurers that sell annuity funds up to a certain amount, those backup funds don’t always make customers whole and can take years to pay out.
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.
[1] You can read the article here: Annuities Aren’t Always Safe. 777 Partners and Soccer Teams Show Why. – Barron’s (barrons.com)
