Considering an annuity? Make sure you understand the benefits and the restrictions.
Are you 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? Annuities can seem confusing when they are rather simple.
Would you like to know what questions to ask?
Here are fundamental questions 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 was a few years ago, Executive Life in California failed, and some of their contacts are still in litigation. But their case is a rarity, and insurance companies are so heavily regulated that failure is not in the equation. Any company with an AM Best rating of B+ to A is in my book a solid bet. Always ask and double check their ratings by visiting AM Best Company at http://www.ambest.com.
Ask about withdrawal options, if you need your money how can you get it? Many people think buying an annuity is losing control. Almost without exception, every fixed annuity has some access to the money, some are 10% per year without penalty, and others even more. Annuity contracts can be different, make sure you fully understand this critical provision.
Always ask what percentage you are allowed to withdraw annually. Also, nearly all annuities will waive any and all 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.
Does the fixed annuity have a bailout 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 and make sure the interest rate is for every year of the contract period. If the interest rate is 5% is it 5% for the entire life of the annuity contract.
Is there a bonus offered to me if I buy the annuity? Is a bonus 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 fulfill 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. Ask questions.