ATTORNEY NEWSLETTER
Indexed Annuities Are Complex Insurance Policies
Indexed Annuities Are Not Direct Fund Investments
Surrender Charges, Fees And Return Calculations
Indexed annuities are a particularly complicated variety of deferred annuities. Despite the tile of this product and the various “funds” or “buckets” you may be offered to allocate your premiums to, let’s be clear about one thing: indexed annuities are not direct investments in any stock or blended stock and bond funds. Rather, the return you do (or do not) receive is tied to the return in the chosen fund and subject to further limitation by caps and participations rates. Any withdrawals are potentially subject to surrender charges or withdrawal penalties. Sound complicated? It is. Indexed annuity contracts run from 50 to 100 pages or more. Evans Law Firm, Inc. generally recommends seniors avoid certain types of deferred annuities like indexed annuities because these contracts can be expensive and complicated and tie up a senior’s money for years. Any deceptive sales practices, and sometimes the contracts themselves, may violate certain consumer protections under the Insurance Code and, when sold to seniors, financial elder abuse protections. Cal. Welf. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. Code §§ 790 et seq. (Unfair Insurance Practices Act) and 10509 (suitability requirement) and 10127 et seq. (disclosure requirements). Senior victims may be entitled to damages and an award of attorneys’ fees San Francisco, or elsewhere in California and own a deferred annuity (such as a fixed indexed annuity), call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Lengthy Surrender Periods
Perhaps the primary reason deferred annuities are regarded as unsuitable for older consumers is that withdrawals from these contracts incur an insurance company penalty. This can be an especially difficult situation for seniors who may need their money back for emergencies or increased care costs or other living or medical expenses. Withdrawals during a policy’s “surrender period” are subject to penalties. The period can last ten years or more and the charges can be as high as 15% or greater. For senior consumers this penalty can be particularly harsh. A senior policyholder may need his or her money back for an emergency or escalating care costs or the like and a stiff penalty that eliminates any gain in the invested money and cuts into principal is a real hardship. Surrenders are also taxable events such any surrender can result in large tax bills in addition to the carrier’s penalty.
Contract Limitations On Returns, Commissions, And Fees
As stated above, indexed annuities are not direct investments in index funds such as you could make in a direct ETF or mutual fund investment. Rather the base for your return will be tied to the return of the chosen fund. You will not de credited with any dividends that the stocks in the chosen fund pay. In addition, your return will be subject to an annual cap, which may be considerably below the actual return on the stocks in your chosen index and a “participation rate” that will be less than the 100% participation you see when you make a direct fund investment. There are also administrative fees and subaccount fees. And, of course, the agent selling you the contract will have received a sales commission at the inception of your policy which comes directly out of your premium.
Contact Us
If you are over 60 and live in San Francisco or elsewhere in the State of California and have an indexed annuity, 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.
