Deceptive Sales Practices with Annuities

Annuity sales to senior citizens have significantly increased in recent years along with deceptive sales practices. Before you buy an annuity, you should take some precautions.

What is an Annuity?
An annuity is a contract in which an insurance company makes a series of income payments at regular intervals in return for a premium or premiums you have paid. Annuities are most often bought for future retirement income, and can pay an income that can be guaranteed to last as long as you live.

    Types of annuities:
  • Single Premium Annuity: You pay the insurance company only one premium payment.
  • Multiple Premium Annuity: You pay the insurance company multiple premium payments.
  • Immediate Annuity: You begin to receive income payments no later than one year after you pay the premium.
  • Deferred Annuity: You begin to receive income payments many years later.
  • Fixed Annuity: Your money, less any applicable charges, earns interest at rates set by the insurance company or in a way specified in the annuity contract.
  • Variable Annuity: The insurance company invests your money into a separate account which can be invested in stocks, bonds or other investments.
  • Equity-Indexed Annuity: A variation of a fixed annuity in which the interest rate is based on an outside index, such as a stock market index. The annuity pays a base return, but it may be higher if the index increases.

Is an Annuity Right for You?
First, determine your financial goals – annuities are not ideal for short-term goals. Analyze the amount of money you are willing to invest and the monetary risk you are willing to take.

    Ask Yourself:
  • How much retirement income will I need?
  • Will I need supplementary income for others?
  • How long do I plan on leaving money in the annuity?
  • When do I plan on needing income payments?
  • Will the money be easily accessible?
    Protect Yourself:
  • Always review the contract before you buy.
  • Understand the long-term nature of your purchase.
  • Compare information for similar contracts from several companies.
  • Verify that the company and agent are licensed.
  • Check the company’s credit rating.
  • Keep detailed records. Get all rate quotes and key information in writing.
    Watch for Warning Signs:
  • High-pressure sales pitch.
  • Quick-change tactics to pressure you into a decision.
  • Agent is unwilling or unable to prove credibility.
  • If it seems too good to be true, it probably is!

If you suspect you’ve been a victim of deceptive sales practices, you can request assistance by visiting the National Association of Insurance Commissioners (NAIC).