ATTORNEY NEWSLETTER
Deferred annuities are a financial product that delays payments of income until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which the plan is converted into an annuity and payments are received. Although insurance companies and their agents who sell deferred annuities often tout the benefits, it is important for consumers to be aware of the risks and disadvantages of buying this type of product as well.
Examples of the disadvantages of deferred annuities include:
-Surrender charges- Surrender charges refer to penalties that apply when the policy holder tries to withdraw money from a deferred annuity. These can be as high as 25%, and it is often 10-15 years before a policy holder can withdraw funds without incurring surrender charges.
-Forfeiture charges- An agent may offer a higher return through a bonus or interest tied to a stock market index, but the policy often requires the policy holder to hold onto the policy for as much as 15 years to avoid forfeiting them.
-Charges at death- Deferred annuities offer a death benefit, but the policy can sometimes penalize the heirs or estate of the deceased person.
-Teaser interest rates- Agents may offer a high rate of return to entice someone to buy a deferred annuity, but the interest rate may drop to a lower rate the following year.
Deferred annuities are very costly products that often offer inferior rates of return compares to other investment products. Additional costs that policy holders are often paying for include:
-Commissions- The agent can often make as much as 15% of what the policy holder paid. This can create a conflict of interest when an agent is making a recommendation.
-Bonuses and Teaser Rates- Although these may look promising, the policy holder ends up paying for these extras with lower interest rates in later years.
-Liquidity- Due to the long surrender periods and surrender charges, deferred annuities are illiquid. Policy holders are penalized if they have to make a withdrawal, even in case of emergency.
Companies that sell deferred annuities include John Hancock Life Insurance Company, Transamerica Life Insurance Company, The Prudential Insurance Company of America, Lincoln Benefit Life Company, Zurich American Insurance Company, Genworth Life Insurance Company, ING (often sold through subsidiaries including Security Life, ReliaStar, ING Life and Annuity, and ING USA), Aviva Life Insurance Company, Aviva USA/Athene USA, Aviva Life and Annuity Company, and Allianz Life Insurance Company.
Evans Law Firm, Inc. has offices in Sonoma, Los Angeles, and San Francisco, and handles all types of financial fraud and financial elder abuse lawsuits. If you have a potential financial fraud case, please contact Evans Law Firm, Inc. at 415-441-8669 or via email at info@evanslaw.com. Some of the companies that sell deferred annuity policies include the following: John Hancock Life Insurance Company, Transamerica Life Insurance Company, The Prudential Insurance Company of America, Lincoln Benefit Life Company, Zurich American Insurance Company, Genworth Life Insurance Company, ING (often sold through subsidiaries including Security Life, ReliaStar, ING Life and Annuity, and ING USA), Aviva Life Insurance Company, Aviva USA/Athene USA, Aviva Life and Annuity Company, and Allianz Life Insurance Company.
