Today more than ever, people are turning to annuities as a product of choice when they are looking for value and security. This is especially true for seniors and baby boomers who are looking to replace traditional fixed investments, such as bank certificates of deposit (CD’s), money market funds and treasury notes, for which interest rate yields are at historic lows. The increased popularity of annuities has been linked to the nation’s recent economic down turn. Whatever the reason, we are seeing more and more boomers and seniors who are selecting annuities as a steady, stable investment to protect their nest egg and provide for their future needs.
Most annuities offer a variety of options including:
• Tax Deferred Interest – meaning the interest earned of the annuity is deferred until you take the money out of the annuity contract, either as a withdrawal or a death benefit proceeds.
• Guaranteed Interest Rates – Annuities can offer a fixed credited rate; some guaranteed interest rates are for one year while other annuities may offer a multiple year rate guarantee.
• Guaranteed Death Benefits – A guaranteed death benefit is available at the death of the owner of the annuity contract. This benefit is usually the sum of all premium deposits plus any interest accumulated (less any withdrawals).
• Guaranteed Lifetime Income Options – This is a feature that can be added to some annuities that provides for annual withdrawals for lifetime, even if the entire value of the annuity has been exhausted.
• Free Withdrawals – Most annuity contracts permit you to withdraw up to 10% of your contract value without any surrender charges.
• Systematic Withdrawals – You can request an amount to be withdrawn from your annuity on a regular basis.
• Waiver of Surrender Charges – Under certain situations, surrender charges can be waived. These may include withdraws made to meet minimum payouts required on tax qualified contracts (RMD). Also, surrender charges may be waived while you are confined to a licensed hospital, convalescent or a hospital facility.
The following is a list of frequently asked questions about annuities from the Ohio Department of Insurance (ODI).
Q. Are the life insurance and annuity policies I purchase safe or am I going to lose my money?
A. Your policies are safe. Ohio life insurance companies are financially sound and fully able to honor all policy holders’ claims. The ODI closely monitors life insurers to ensure policy holders are protected and that there will continue to be sufficient asset to pay claims.
Q. Should I cash in my life insurance and annuity policies?
A. As stated above, Ohio life insurance companies are financially sound so your policies are not in jeopardy. Whether you should cash in your life insurance or annuity insurance policy or switch insurance to another insurer is as always a personal decision. Please be aware that some policies may contain surrender charges and/or cancellation penalties. Talk to your financial advisor before making any decisions.
Q. Would my life insurance and my annuity policies be protected if my company is declared insolvent and ordered to be liquidated by a court?
A. Yes, there are limited protections. There are guaranty funds in place in all states which act as a safety net in the event an insurer becomes insolvent. You may obtain information about Ohio’s Life & Health Guaranty Association by calling (614) 442-6601 or at www.olhiga.org.
Q. How can I check on the financial status of my company?
A. You can search for your company using NAIC’s Consumer Information Source (CIS). Here you will find financial information specific to the company, as well as complaint data and licensing information. www.naic.org/cis/index.do
Q. Who do I call if I have questions about my policy?
A. Talk to your financial advisor or contact the Ohio Department of Insurance Consumer Services Division at (800) 686-1526.
Q. What can I do if I am having difficulty getting through to my company on the telephone?
A. You may contact the Ohio Department of Insurance Consumer Services Division at (800) 686-1526 and they will assist you in reaching your company.
For more information about how annuities and the various options that could benefit you, please call 1-800-229-9666.
