The Right Questions to Ask the Insurer of a Fixed-Indexed Annuity

1. If owner surrenders, can owner receive less than the initial premium?
2. Are there any up-front sales charges?
3. Are there any administrative fees or annual fees?
4. What are the surrender charges and how long do they last?
5. Are surrender charges imposed on principal or on principal and interest?
6. Will surrender charges be waived for a partial withdrawal? If so, how much can be partially withdrawn?
7. Can you take a partial withdrawal during the 1st year without a surrender charge?
8. Is a fixed interest rate available?
9. How is that fixed interest rate determined?
10. What is the history of renewal rates for that specific annuity? What is the history of renewal rates for the insurance company's other annuities?
11. Will surrender charges be waived if the annuitant dies?
12. If annuitant dies, will a death benefit be paid? If so, to whom? (owner or beneficiary)
13. Will surrender charges be waived if the owner dies?
14. If owner dies, will a death benefit be paid? If so, to whom? (annuitant or beneficiary) Note: Sometimes an insurance company allows something under current practice, however, it is not guaranteed. If this is the case, then "current practice" should be added to these answers.
15. Will surrender charges be waived if owner annuitizes? If so, what is the minimum annuitization period for these charges to be waived? (5 year certain? Or must option have a life contingency?)
16. Unless already noted, in what other instances, if any, can surrender charges be waived?
17. For how long is the fixed interest rate guaranteed for, if available and if chosen?
18. What is the minimum premium?
19. What is the maximum premium?
20. What is the minimum issue age?
21. What is the maximum issue age?
22. What are the guaranteed settlement rates? Current settlement rates? (Use ages 65 and 75 and 10 year Certain and Life unless conditions of case warrant otherwise.)
23. Is there a market value adjustment? Is so, does it apply to partial withdrawals? And to a death benefit? What could the adjustment be if a surrender took place in the 3rd year of the contract and interest rates were 2% higher at surrender than at the purchase date?
24. What other features, positive and negative, should prospective purchaser know?
25. How are earnings credited? Annual Reset? High Water or Point-To-Point?
26. Is there any averaging of gains? If so, to what extent?
27. Is there a spread or charge, fees or any deductions of any kind? What is it? Can it be increased? If so, how much?
28. What is the Participation Rate? Can it be decreased?
29. Is there a cap on gains?
30. If so, to what extent?
31. Do surrender charges disappear? Do they reappear?
32. How would their annuity have performed under these time periods: 12-31-88 -12-31-95; 12-31-81 -12-31-88; 12-31-70 -12-31-77; 12-31-92 -12-31-99?
33. Please explain each cash value strategy.
34. Are additional contributions allowed?
35. Are there any limits to premium going into any strategy?
36. Are there any spreads, charges or any other deductions of any kind? Can they be increased? What's the maximum?
37. Are transfers between strategies allowed? Are there any restrictions or limitations? If so, to what extent?
38. Are transfers or withdrawals or surrenders or a death benefit subject to a market value adjustment?
39. Please explain each cash value strategy.
40. Are additional contributions allowed?
41. Are there any limits to premium going into any strategy?
42. Are there any spreads, charges or any other deductions of any kind? Can they be increased? What's the maximum?
43. Are transfers between strategies allowed? Are there any restrictions or limitations? If so, to what extent?
44. Are transfers or withdrawals or surrenders or a death benefit subject to a market value adjustment?

Are we saying that features of an annuity are more important than the insurance company standing behind the guarantees? No, in fact, we are saying the opposite. However, we are also saying that it pays to know the annuity that you are discussing since our customers deserve and have the right to know everything about their annuity.

Questions To Ask The Consumer

We just reviewed some of the questions we could ask an insurer about their annuity.

However, asking consumer questions is equally important. Later, we have listed 20 questions. Add all or some of these questions to the questions you currently ask.

When you do, you'll be ascertaining - to a certain extent - their time horizon, tolerance for risk, and needs. And, based upon the answers to these questions plus your regular questions, you'll be able to identify when and if a Fixed-Indexed Annuity should play a role in their retirement planning.