ATTORNEY NEWSLETTER
Deferred Annuities Are Unsuitable Investments For Seniors
Costly Penalties On Getting Your Money Back
Participation Rates And Caps And Fees Lower Returns
Deferred annuities are insurance contracts where the policyholder pays a premium to an insurance carrier now for income payments in the future. Evans Law Firm, Inc. generally recommends against deferred annuities for older consumers because they are expensive and complicated and because these contracts tie up a senior’s money for years. Whenever an insurance agent or financial advisor of any kind suggest an indexed annuity for you, be wary, especially if you are retired or nearing retirement. Sales and recommended surrenders and exchanges of deferred annuities to seniors may constitute financial elder abuse claims under Cal. Welf. & Inst. Code § 15610.30. Questionable sales tactics, like unannounced home visits or falsified applications, are illegal. See, e.g., Cal. Ins. Code § 790 et seq. (Unfair Insurance Practices Act). If you are over 60, and live in Sonoma County or elsewhere in California and would like us to review your annuity contract, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Surrender Penalties, Fees, Participation Rates And Caps
There are a number of features that bear scrutiny with these complicated insurance contracts. Three features of particular concern for seniors policyholders are:
- Surrender Penalties. A surrender charge is a fee assessed on investors assets if they move money out of a deferred annuity. The surrender charges are often 5 to 7 percent of assets in year one and decline one percent a year until they go away over the next 5 to 7 years. If an older person needs their money for an emergency or because their living and care expenses have increased beyond what they expected, will be penalized by an early surrender of their contract. Direct mutual fund investments do not penalize withdrawals.
- 2. Commissions And Deferred annuities are expensive. First, a selling agent receives a significant commission on the sale of the contract to you which can be around 8%. That comes straight out of your premium. Yearly expenses can be high too. Conversely, annuity fees can run in the range of 2.5 percent to 3 percent a year (versus 1-1.2% average on mutual funds). If an agent sells you additional policy features, known as “riders,” you will pay more for those too, and your return may be eroded by another 1-2% or more annually.
- Participation Rates And Caps On Performance. Carriers will typically impose a “participation rate” set below 100% so if the index you chose increases you will not get a 100% of that return, but a lower percentage. Annuity providers also determine a “cap rate,” a ceiling on returns that limits the growth of an indexed annuity. This cap ensures that the annuity provider can meet their obligations and still make a profit on the product.
Contact Us
If you are over 60 and live in Sonoma County or elsewhere in California and would like a free review of your policy contact Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669 (or toll free at 1-888-50EVANS), or by email at <ahref=”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
Nationwide Mutual 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.
