Mississippi Insurance Department - Life Insurance and Annuities

An annuity is a contract between you and an insurance company. You buy the annuity by making one or more premium payments to the insurance company. The insurance company makes income payments to you, for life or for a limited time.

Annuities usually have commissions and other fees that cut into your investment. They typically earn less money than stocks and bonds. Most people who buy an annuity do so to get an income when they retire. An annuity is a long-term investment.

Make the decision carefully. The answer depends on your financial situation, age, health, and goals. Annuities can be right for some people and wrong for others. Ask yourself the following questions. Discuss them with a trusted family member or financial advisor.

If you answered No to any of these questions, an annuity is probably wrong for you. Life Annuity - The insurer will pay you an income for as long as you live. However, there are no survivor benefits.

This means all benefits cease upon your death. Period Certain Annuity - The insurer will continue to pay your survivor an income for a specified period of time.

Life Annuity with Period Certain - The insurer will pay you an income for as long as you live, but if you die before the certain period that you have chosen Period Certainthe income will be paid to a survivor beneficiary you designate until the end of that period. In recent years, there has been an increasing emphasis on deferred annuities. If you are going to make a good choice when you buy a deferred annuity, you need to understand what kinds are available.

If one kind does not seem to fit your needs, find out about the other contracts that are described in this guide. If you need more information, you should check with an insurance agent or company, the Internet, or reference books on annuities that are available at your public library.

The California Department of Insurance CDI has a toll-free Hotline telephone number 1 HELP There are two basic types of deferred annuities - fixed annuities and variable annuities with several variations:. Unlike variable annuities, equity-index annuities cannot lose value. These are complex contracts. They typically offer a minimum guaranteed return with additional interest based on how the index performs.

Most of these types of annuities will also allow you to earn a minimum rate of interest instead of tying the amount of interest you earn to an equity index.

For more information about equity-index annuities, see: Securities and Exchange Commission for Seniors page. For more information on variable annuities go to: Securities and Exchange Commission Variable Annuities page. Other types of deferred annuities combine the characteristics of fixed and variable annuities. Annuities are sometimes sold as alternatives to investment vehicles such as certificates of deposit, money market accounts, mutual funds, etc.

Each investment may affect your financial plan in a different way. If you die during the accumulation phase of a deferred annuity, an amount usually at least equal to the amount you have accumulated may be paid to your beneficiary.

However some annuity contracts allow the insurance company to assess a surrender charge penalty if you die during the accumulation phase. If you cancel the contract, or take some money out of it, there may be surrender charges deducted from the accumulation value.

The amount you receive is usually referred to as the cash value. It is usually not a good idea to purchase a deferred annuity unless you are planning to keep it for more than years. Tax Qualified -A tax qualified annuity is sold as part of a tax-qualified plan such as an IRA traditional or company pension plan. The annuity is purchased using before tax dollars. Non-Tax Qualified - Non-Tax Qualified means the annuity is purchased using after-tax dollars such as a Roth IRA.

These are funds you have earned and where taxes have already been paid. These funds are allowed to accumulate on a tax deferred basis until the funds are distributed. Charitable Gift Annuities - A charitable gift annuity is a contract under which a charity, in return for a transfer of cash, marketable securities or other assets i. The annuity is backed by the organization's total assets. Organizations wanting to issue charitable gift annuities must obtain a Certificate of Authority from the CDI.

Charitable Gift annuities are not protected by the California Life and Health Insurance Guarantee Fund. See section below on Reliability and Stability of Companies. The answer depends on your financial situation, your health and goals. For some, an annuity can be an appropriate part of an overall financial plan. For others, an annuity can be totally unsuitable.

You should think about what your goals are, as well as how much risk you are willing to take. Ask yourself the following questions:. It is important to know whether an annuity fits your situation before entering into a contract. Individual needs change with time and what may have benefited you in the past may not be in your best interest now.

How Do Annuities Work? Find Out Before Taking the Plunge

Do your homework and ask questions. Never jump into purchasing something you don't understand. Think about your long term goals. Some of these products carry high surrender charges during the initial years of the contract in order to withdraw your money.

Always ask about the drawbacks, not just the benefits.

How Do Insurance Companies Manage Their Annuity Money? | Finance - Zacks

California requires individual annuity contracts for seniors to contain a disclosure regarding the surrender charge period unless the contract does not contain those charges. For more information on annuities, see: Wisconsin State Department of Insurance publication Understanding Annuities PDF format.

As Baby Boomers start to retire, seniors are becoming a major part of the population. Because many seniors have worked all their lives, paid off their homes, and put away money for retirement, they have assets that make them a prime target for individuals that may seek to exploit them financially. Elder abuse is a growing problem that occurs daily in every community. Financial abuse can drain elderly people of all their life savings leaving them vulnerable when there is a family emergency that require health care or long term care.

Illnesses such as dementia and Alzheimer's often make it difficult for a person to ask for help when confronted with financial problems. Agents can make substantial commissions on the sale of annuities. The majority of agents and brokers who sell insurance products obey the laws. However, many elderly individuals have been taken advantage of by insurance agents who have manipulated them into purchasing an unsuitable annuity or replacing existing or established annuities with a new one simply for the agent's financial gain.

If you think you have been a victim of this type of abuse, or if you know of an individual that fits this situation, we suggest that the California Department of Insurance be contacted to file a complaint. Unfortunately, the growing popularity of estate planning and living trusts has spurred new scams called "Living Trust Mills". This type of scam often targets seniors. Seniors are many times lured by "free" seminars on living trusts or other similar sales presentations.

Occasionally, sales agents will pose as estate planners or financial experts to gain the trust of the senior in these "free" seminars and later schedule a visit in the senior's home to gather information in order to review the senior's assets and investments.

Often the sales agent will intimidate the senior into believing the senior's investments are unsafe and under-performing, and ultimately convince the senior to move money to an annuity. This is to the sales agent's advantage since that agent is now able to generate a commission. You and your family should make careful decisions when planning an estate and choosing investments. If estate planning documents are not properly prepared or executed they can be invalid and cause lasting damage for you and your family.

Below is a list of some of the warning signs that will help you avoid becoming a victim of these scams:. Before an agent or a broker can come to your home and meet with you, he or she must provide you with a written notice 24 hours prior to the visit. The notice must state:. When an agent or broker contacts you in your home, he or she should make a statement other than a greeting before asking you any other questions.

He or she should state the purpose of the contact is to talk about insurance, or to gather information for a follow-up visit to sell insurance. The agent or broker should state all of the following information:.

Any person arriving at your house with the agent or broker should provide a how do insurance companies make money on annuities card or other written identification stating their name, business address, telephone number, and any insurance license number. Any person attending a meeting at your home should end all discussions and leave your home immediately if, or when you ask them to do so. No person may solicit best buy charge a restocking fee sale or order for the sale an annuity at the residence stock market 8/18 a senior, in person or by telephone, by using any plan, scheme, or ruse that misrepresents the true status or mission of the contact.

Look over the annuity to make sure it is what you wanted. Every annuity contract that is initially delivered or issued for delivery to a senior citizen in this state shall have printed on bt infinity option 1 and evening and weekend calls or attached to it a notice stating to start trade binary options successfully policy may be returned within 30 days from the date you received it for a full refund by returning it to the insurance company or agent who sold you the policy.

After the 30 days, cancellation may result in a substantial penalty, known as a surrender charge". Independent rating organizations rate the financial stability of insurance companies.

Be sure to check out ratings of any insurance company you are considering before committing your funds to purchase an annuity. Also, make sure that your insurance company is licensed in California. Owners of annuities issued by companies licensed in California may be partially protected by the California Life and Health Insurance Guarantee Association CLHIGA in the event of the financial failure of the insurer.

Any portion of the contract not guaranteed by the insurer, or under which the risk is borne by the purchaser is excluded from CLHIGA protection. Products developed by life insurance companies are sometimes marketed through banks and brokerage firms. The person who sells you the annuity should be a licensed life insurance agent, and in the case of a variable annuity, a licensed securities dealer.

If you purchase an annuity the stock market plunge these sources, you should ask for the name of the insurance company, since the insurance company, not the bank, will be managing your money.

If you need further information on CLHIGA or the monetary protection under CLHIGA, contact the CDI by calling our toll-free Hotline number at 1 HELP As a senior citizen, you have earned a place of honor and a special right to respect and recognition in our society. You have worked a lifetime to build up assets and should take precautions to protect yourself and those assets.

Purchasing insurance and other financial products such as annuities that meet your needs can be challenging. Since your financial situation may change over time, it is important to review and understand your insurance policies and contracts to decide if they are still right for you. If you are contemplating purchasing a new or replacement policy, you should consider the following:.

Have you been sold an annuity product that was unsuitable due to your financial, health or other circumstances at the time of sale? Would you like to file a complaint against the agent delta airlines stock market the insurer? Before contacting the California Department of Insurance, consider speaking with the branch manager or other person who supervises the individual who sold the annuity.

This person may have authority to cancel the transaction if the sale was inappropriate. Also, consider contacting the insurance company that issued the annuity as it also has authority to cancel the contract if it finds the sale was inappropriate. To file a complaint or to answer your questions with the California Department of Insurance call our toll free number 1 HELP or Request for Assistance webpage. Accumulation Phase - The phase in which you pay into your annuity, and your annuity earns interest.

Annuitization Phase - The phase in which you receive monthly payment from your annuity. Basis Points - The fees in your annuity; reflects a percentage of your investment. Death Benefit - The amount of money your survivor beneficiary receives if you die before you begin the annuitization phase; generally the value of your annuity or the amount you have invested, whichever sum is greater.

However, some annuity contracts do impose a surrender charge if your beneficiary wishes to withdraw all of the money in the annuity.

Free Look - The right of the owner to have a period of ten or more days to examine an annuity product, and if not satisfied, return skinny forex factory to the company for a full refund of all amounts paid.

Seniors are provided with a 30 day free look period. If the annuity is non-qualified, there is no requirement to withdraw the funds at any age except as required by the contract itself. Illustration - A document used in annuity sales presentations showing year-by-year numbers indicating how a contract will work. Usually it assumes that amounts being paid today will continue pakistan forex market all future years.

Mode of Premium Payment - The frequency of premium payments during the contract year. Premium payments can usually be made on annual, semi-annual, quarterly, or monthly mode. Mortality Table - A statistical table showing the death rate probability of death for each age. Ownership - Best intraday trading tricks rights, benefits, and privileges under a policy controlled by the owner, who is usually the insured.

Ownership may be transferred or assigned to someone else by written request of the current owner. Premium - The payment a policy owner is required to make to an insurance company to purchase insurance coverage and to keep the policy in force.

Surrender - The process to voluntarily terminate an annuity for its cash value or other non-forfeiture options.

Usually, there is a fee charged if you surrender your annuity within the first seven to ten years of owning it. Tax Deferral - The money that accumulates in your annuity grows tax-deferred, meaning you do not pay taxes on it until you begin receiving annuity payments. Term Certain Annuity - An annuity that provides you with income payments for a specific period of time, such as 10 or 20 years, rather than a lifetime.

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Elder Abuse Living Trust Mills Protections for Seniors During Sales Presentations Reliability and Stability of Companies Senior Tips Filing a Complaint with the California Department of Insurance Glossary of Terms Back to Top What Seniors Need to Know If you are a senior, someone may offer to sell you an annuity. There are many kinds of annuities.

And sometimes companies and agents take advantage of seniors. Before You Buy An Annuity, Make Sure You Understand what an annuity is. Protect yourself, so you are not pushed into buying an annuity. Decide if an annuity is right for you. If you have doubts or questions, contact the California Department of Insurance.

What is An Annuity? Do Not be Pushed into Buying an Annuity An agent should not push you to buy an annuity. AARP, the senior group, warns: Do not get a reverse mortgage so you can buy an annuity. You will pay too much in fees and extra charges if you do this. The law says that anyone who offers to sell you an annuity must give you honest and accurate information on the terms and rules of the annuity, and its costs and benefits. If you feel pressured, call the California Department of Insurance.

Is an annuity right for me? Yes No Can I afford to tie up my money for many years? Yes No Will I have enough money left to have an emergency fund, such as a bank account? Yes No Will I have enough money left for my long-term care and other health care needs? Yes No Can I cover my expenses until I start getting income payments? Back to Top Deferred Annuities In recent years, there has been an increasing emphasis on deferred annuities. There are two basic types of deferred annuities - fixed annuities and variable annuities with several variations: Fixed Annuities guarantee that your money will accumulate at a minimum specified rate of interest.

However, the company may pay you a higher rate of interest if its investment experience is better than the minimum guarantee. A fixed deferred annuity always contains guarantees.

The guarantees are conservative, so that the company will be able to pay you the guaranteed amounts, even if conditions are very bad. If you are shown any tables of numbers illustrating how the annuity might grow in the future, you should keep in mind that the non-guaranteed numbers could turn out to be lower or higher than those shown.

Keep in mind that some annuities offer a higher guaranteed rate of interest for the first year than for subsequent years. Back to Top Variable Annuities differ from fixed annuities in that you direct the distribution of your money among several different accounts and the accumulated funds reflect the experience of those accounts rather than that of the company.

Typical account choices are: If the value of your accounts increases or decreases, it will affect the accumulated amount. Variable annuities are more risky to you than fixed annuities because you can lose money that you put into the annuity, but there is a possibility of greater returns.

Back to Top Tax Qualified -A tax qualified annuity is sold as part of a tax-qualified plan such as an IRA traditional or company pension plan. Back to Top Is An Annuity Right For You? Ask yourself the following questions: Will you need that additional income only for yourself, or for yourself and others? If you put your money into an annuity, will you have enough money to cover your expenses? How long can you leave money in the annuity and does the annuity let you take out money when you need it?

How long does the surrender charge period last? Is this a single premium lump sum or a multiple premium installment contract? For a fixed annuity, what is the initial interest rate and how long is it guaranteed? How much of a partial withdrawal can you take without being penalized? Is there a death survivor benefit? Will you need access to your money for unexpected family emergencies?

Will you need access to your money for long-term care or health care? Can you afford to lock up your money for a period of several years? Wisconsin State Department of Insurance publication Understanding Annuities PDF format Back to Top Elder Abuse As Baby Boomers start to retire, seniors are becoming a major part of the population.

Back to Top Living Trust Mills Unfortunately, the growing popularity of estate planning and living trusts has spurred new scams called "Living Trust Mills". Below is a list of some of the warning signs that will help you avoid becoming a victim of these scams: These agents are not attorneys and not experts in living trusts. The sales agent often offers a free seminar or other sales presentation for their living trust services.

These solicitations and presentations are often held in assisted living centers, retirement communities, churches, and other places where seniors gather. The sales agent uses the guise of setting up or updating an existing living trust in order to access the senior's financial information. The sales agent will often misinform the senior about the existing investment, telling the senior that the investments or savings accounts carry a much higher risk than the annuity or other financial product the sales agent is are offering.

Back to Top Protections For Seniors During Sales Presentations Before an agent or a broker can come to your home and meet with you, he or she must provide you with a written notice 24 hours prior to the visit.

The notice must state: During the visit or follow-up visit, you will be given a sales presentation on an annuity. You have the right to have other persons present at the meeting, including family members, financial advisors or an attorney.

You have the right to end the meeting at any time. The notice shall include the Consumer Hotline toll-free telephone number 1 HELP The following individuals will be coming to your home and list all attendees, and insurance license information, if applicable. The agent or broker should state all of the following information: The names and titles of all persons arriving at your home.

The name of the insurer represented by the agent. Back to Top Free Look Period Look over the annuity to make sure it is what you wanted. Reliability and Stability of Companies Independent rating organizations rate the financial stability of insurance companies. Back to Top Senior Tips As a senior citizen, you have earned a place of honor and a special right to respect and recognition in our society.

If you are contemplating purchasing a new or replacement policy, you should consider the following: Obtain all proposals in writing. Do not be pressured into buying any insurance product. Take enough time to review the information before making any decisions. Do not sign anything you do not understand. Consider having a trusted family member, friend or adviser participate in discussions concerning the purchase of any insurance product. Make sure the agent, broker and insurance company are properly licensed to sell the product you are considering purchasing.

Make sure you receive a full disclosure of all information relating to the benefits and possible negative consequences regarding the replacement of an existing annuity. Obtain a full disclosure of all surrender charges and related time frames in connection with an annuity prior to purchase. Back to Top Filing A Complaint With The California Department Of Insurance Have you been sold an annuity product that was unsuitable due to your financial, health or other circumstances at the time of sale?

Back to Top Glossary Of Terms Accumulation Phase - The phase in which you pay into your annuity, and your annuity earns interest. Non-Tax Qualified Annuity - An annuity that is funded with after-tax dollars Ownership - All rights, benefits, and privileges under a policy controlled by the owner, who is usually the insured. Tax Qualified Annuity - Annuity that is funded with pre-tax dollars. Privacy Policy ADA Compliance Site Map Free Document Readers Scheduled Site Maintenance.