Considering an annuity? Not sure exactly what to do, which policy to buy, what benefits to ask for or do you even know what to ask for? Annuities can seem to be very confusing when actually they are rather simple.
Would you like to know what questions to ask? Here are basic questions which to ask.
- What is your financial rating strength? Ratings are important but not as important as you might think. Throughout history virtually no one has ever lost any money on deposit in a fixed annuity. The reason I say almost is a few years ago, Executive Life in California failed and some of their contacts are still in litigation. But their case is a rarity, insurance companies are so heavily regulated that failure really is not in the equation. Any company with an AM Best rating or B+ to A is in my book a solid bet. Always ask and double check their ratings by visiting www.ambest.com . You can also obtain information about a specific company by calli9ng your local department of insurance.
- How do I access my funds when I need or want them, what are my options? Many people think buying an annuity is losing control. Almost without exception every fixed indexed annuity allows s some level of access to your money, some are 10% per year without penalty, and others even more. Annuity contracts can be different, make sure you fully understand this important provision. Always ask what percentage you are allowed to withdraw annually. All annuities will waive surrender fees at the death of the annuitant so your named beneficiary can receive the full value of the annuity, without any reduction in funds. Fees are also waived should you decide to use your money as a fixed payout, some restrictions may apply.
- Does the fixed annuity have a bail out provision? Should I decide I want my money and no longer want the annuity, is there a provision to just quit? This can be important should the actual interest rates available suddenly become much more attractive. As an example, suppose your interest rate on your fixed annuity was 4% per year but suddenly because of a government decision or market changes, interest rates were now 8%, does the annuity allow you to get your money back? You would be giving up some earned interest by using this provision but it just might make sense under certain circumstances. Ask about the Return of Premium provision.
- What interest rate will I be enjoying? Be sure and ask about interest credit rate calculations. How is interest credited and when is it credited. Many new annuity products contain large guaranteed interest rates which increase the calculation of funds when the annuity is used for income. Ask about any income rider features that may be added to the annuity, these riders can add thousands to an account when the funds are removed for income.
- Is there a bonus offered to me if I buy the annuity? Bonuses are often offered as an inducement to buy. These are real money and will be added to your account, however, make sure you understand exactly how the bonus will be applied. In almost all cases, the bonus is credited over time and as long as you fulfil the time period of the annuity contract, the bonus is yours, but always ask for the explanation and the details.
Annuities can be some of the smartest vehicles you can buy, especially if the benefits of the annuity match up with your desired goals. Like all important decisions make sure you fully understand how the annuity works and how the features of the annuity will benefit you. Ask questions and be informed.