Annuity sales to senior citizens have significantly increased in recent years. Unfortunately, as annuity sales have risen, so have questionable or deceptive practices used by companies and agents looking to take advantage of uninformed consumers. It is extremely important, when considering whether or not to buy an annuity, to take the necessary precautions so you can make an informed decision.
Here are some tips about purchasing annuities from the Georgia Department of Insurance and the National Association of Insurance Commissioners (NAIC).
Understand the Product You are Buying
When it comes to annuities, inappropriate sales practices can occur in many ways and come from various sources. Anyone can be a victim, but senior citizens remain a prime target. Here are a few ways to protect yourself:
- Verify that the company and agent are licensed. In order to sell insurance in Georgia, insurance companies and agents must be licensed. To confirm the credibility of a company or agent, contact the Georgia Office of Commissioner of Insurance.
- Check the company’s credit rating. Legitimate insurers have their “creditworthiness” rated by independent agencies such as Standard & Poor’s, A.M. Best Co., or Moody’s Investors Services. An “A+++” or “AAA” rating is a sign of a company’s strong financial stability. You can check a company’s rating online or at your local library.
- Review the contract carefully. Terms and conditions of each annuity contract will vary. Before you decide to buy an annuity, be sure to review the contract carefully.
- Ask about potential surrender charges. Surrender charges are charges to the value of the annuity account if you decide to cash out of the annuity coverage before you have kept it for more than a certain number of years, such as 10 years, 20 years, etc.
- Be aware that replacement policies start new surrender charges. If you are replacing an annuity, remember that the new policy will start a new set of surrender charges. Be sure to get detailed information about them.
- Understand the long-term nature of your purchase. Be sure you plan to keep an annuity long enough so the charges don’t take too much of the money you invest.
- Compare contracts from several companies. information for similar contracts from several companies; this may help you make a better decision.
- Make sure you understand everything. Ask your agent or the company for an explanation of anything you don’t understand.
- Consider the quality of service. The quality of service you’re receiving from the company and the agent should be an important factor in your decision.
- Remember that the proof is in the paperwork. As you complete your research and decide to purchase a particular policy, it’s important to keep detailed records. Get all rate quotes and key information in writing. Once you’ve made a purchase, keep a copy of all paperwork you complete and sign, as well as any correspondence, special offers and payment receipts.
Avoid Being Fooled by Deceptive Sales Practices
Watch for the following red flags, which serve as warnings of possible deceptive sales practices:
- High-pressure sales pitch. If a particular group or agent has contacted you repeatedly, offering a “limited-time” deal that makes you uncomfortable or aggravated, trust your instincts and steer clear.
- Quick-change tactics. Skilled scam artists will try to prey on your “time fears.” They may try to convince you to change coverage quickly without giving you the opportunity to do adequate research. In Georgia, you have at least 10 days after actual delivery of an annuity policy to review it and decide if you want to keep it. You are able to get a complete refund if you return it within this “free look” period.
- Unwilling or unable to prove credibility. A licensed agent will be more than willing to show adequate credentials.
- Too good to be true. If the annuity seems too good to be true, it probably is!