Is an Annuity Right For You?
To find out if an annuity is right for you, think about what your financial goals are for the future. Analyze the amount of money you are willing to invest in an annuity, as well as how much of a financial risk you are willing to take. You shouldn’t buy an annuity to reach short-term financial goals. When determining whether an annuity would benefit you, ask yourself the following questions:
- How much retirement income will I need in addition to what I will get from Social Security and my pension plan?
- Will I need supplementary income for others in addition to myself?
- How long do I plan on leaving money in the annuity?
- When do I plan on needing income payments? Can I gain access to the money when I need it?
- Do I want a guaranteed interest rate and little or no risk of losing the principal or am I willing to risk losing principal for the chance of higher earnings that aren’t guaranteed?
- Or, am I somewhere in between and willing to take some risks with an equity-indexed annuity?
Remember – most annuities are long term contracts and should not be considered or purchased for short-term purposes. Be aware that some companies may advertise high interest crediting rates and bonuses on their annuity products. However, depending upon the terms of the annuity contract, the advertised interest and/or bonus may not be available to the annuitant if the contract is surrendered for cash. In other words, some contracts may credit and accumulate interest and/or bonuses to the policy’s annuitization value (not the cash value) and the annuitant may be required to receive policy benefits over a long period of time in order to receive the advertised high interest and/or bonuses. This is another reason it is very important for consumers to carefully read and understand the terms of the annuity contract prior to purchasing the policy.
When it comes to annuities, inappropriate sales practices can occur in many ways and come from a variety of sources. Anyone can be a victim, but senior citizens remain a prime target. Follow the insurance tips provided above to protect yourself.
Beware of Deceptive Or High-Pressure Sales Practices
Annuity sales to senior citizens have significantly increased in recent years. However, as annuity sales have risen, so has a sense of confusion among consumers. This is due, in part, to questionable or deceptive sales practices employed by a few 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 in order to make an informed decision that is best for you.
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” a 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.
- Unwilling or unable to prove credibility. A licensed agent will be more than willing to show adequate credentials.
Remember, if it seems too good to be true, it probably is! If you suspect you’ve been a victim of deceptive sales practices, or you have a specific question and can’t get the answers you need from an agent or the insurance company, contact the North Carolina Department of Insurance, Consumer Services Division at 855-408-1212.