Surrender Charges: The Unlikely and Often Unnoticed Aspect of Annuities

Annuities

Annuities are being sold in unbelievable numbers these days, as insurance companies and agents convince individuals it makes sense to put their money in some sort of insurance “investment.” Yet, annuities contain many severe disadvantages to the consumer, such as surrender charges. These charges are one of the many pitfalls to annuities, no matter your age, wealth, or how much you think you know about annuities.

Surrender Charges

A surrender charge is a fee that an annuity holder pays if he or she opts out of their annuity contract and withdraws the money from the account. Surrender charges act as penalties if you take out your money before a set amount of time, called the deferral period. Surrender fees typically are the product of a formula or represent a flat percentage of the amount of cash withdrawn. These percentages decrease over time, meaning that in your first year, the surrender charge could be 12% of the policy and decrease 1% each year the policy is kept. But note that the penalties are very severe in the early years and only slowly disappear over the lifetime of the contract. And one thing is always true: surrender charges are a direct hit to whatever return you anticipated on your funds.

Moreover, surrender charges are often “hidden” from the prospective buyer and only discovered much later when the annuitant wishes to withdraw some of her own money. Bottom line is that the public by and large is not educated about surrender penalties – and other fees and hidden charged – before purchasing the policy. In most cases, buyers learn of penalties, fees, and other charges only when it’s too late; the contract is in place and any exit is extremely costly.

Our Recommendation

Read the fine print! Sometimes the surrender charges are hidden in the back of the policy, so that consumers tire before reading them. We also recommend getting a second, third, and fourth opinion on the purchase before buying an annuity policy. We find that individuals who broaden their scope and stay educated on these matters have a better chance at avoiding annuity fraud. If you or anyone you know has a Fidelity and Guarantee annuity that was purchased and surrendered in the last four years and are over the age of 60 in California, call us for a free and confidential consultation.

Some of the major annuity and life insurance providers in California are:

• Aviva/Athene/Accordia Life Insurance Company
• Transamerica Life Insurance Company
• John Hancock Life Insurance Company
• Bankers Life Insurance and Casualty company
• Massachusetts Mutual Life Insurance Company
• Midland Life Insurance Company
• North American Company for Life and Health Insurance
• Pacific Life Insurance Company
• Prudential Life Insurance Company
• Genworth Life Insurance Company
• ING USA Annuity and Life Insurance Company
• Lincoln Benefit Life Company
• Metlife/Metropolitan Life Insurance Company
• Unum Life Insurance Company of America
• Voya/Reliastar Life Insurance Company

Contact Us

Evans Law Firm, Inc. handles annuity fraud and insurance fraud cases and lawsuits in Santa Clara, CA and in all other counties in California as well. If you have purchased an annuity policy, or are considering purchasing one, and would like to know whether it is a suitable investment for you, contact Evans Law Firm, Inc. at 415-441-8669 or via email at info@evanslaw.com.