Surrender Charge Waiver (Nursing Home & Terminal Illness or Unemployment)
The first surrender charge waiver clauses evolved in the early 1980’s. Originally, if the interest rate declared in year 2 or thereafter was more than 100 basis points lower than the 1st year rate, annuity owners could surrender or exchange their annuity without insurer surrender penalties. As you are aware, this type of waiver clause slowly disappeared and nursing home and terminal illness bailout clauses appeared. Simply put, some Fixed-Indexed Annuities can pay the annuity value (no surrender penalties) if a “qualifying illness” or “eligible confinement” or “unemployment” occurs.

Example
Bob and Norma, ages 65 and 66 respectively, decide to reposition 25% of the money that they have in money market accounts and passbook savings into an annuity with a Nursing Home Confinement Crisis Waiver.

Unfortunately, three years later, Norma requires Long-Term Care and is confined to a nursing home for 90+ days. Since expenses for the nursing home are quite high, they begin withdrawing money they kept in their money market account and passbook savings. In the event they need more money later, they will be able to surrender their annuity free of surrender charges since the annuity they chose had a surrender charge crisis waiver for nursing home confinement.

What was learned from this example? There are several advantages to keeping some your money in the bank and some of your money in an annuity with a wide range of crisis waivers because none of us can predict the future and when, and if, an emergency will occur.

This story is fictional and does not portray any individual(s) or company(ies) nor any anticipated performance of any specific product.