Educational Consumer Tips
Author: Better Business Bureau
When approached with an offer of insurance of any kind, consumers are advised first to find out whether the insurer is licensed to operate in their state. The BBB also advises comparison shopping in regard to price and policy provisions and exclusions. Policyholders may wish to seek professional advice before changing to another insurance program. Finally, consumers should carefully read and understand any policy before signing.
AGENCIES TO CONTACT
South Carolina Insurance Commission
Columbia, SC 29202-3105.
There are many different products such as fixed annuities, variable annuities, tax-deferred annuities, guaranteed annuities, and more. The most important consideration when purchasing annuities is whether to choose a fixed or variable annuity.
Fixed Annuities are typically based on fixed income products like bonds and pay a guaranteed stream of income. You know how much income you will receive every month when you finalize your contract to purchase. A fixed annuity guarantees you a certain income.
Variable Annuities are based on mutual funds and pay an income that moves up and down with changes in the value of the underlying fund. A variable annuity can be a riskier investment.
Some tips when purchasing annuities:
1)Comparison shop ? You?ll want to make sure the company you pick will be around at least as long as you. Check out the different annuities, features, prices, and flexibility.
2)If the insurance company is offering bonus rates for only a set period of time, make sure the underlying interest rate and the company selling the annuity are financial viable. Once the bonus rate term expires, there is no guarantee that renewal rates will be competitive.
3)Understand the annuity?s surrender fees. If the surrender fee is high (typical fees are 6-7%) and decline over a period of 5-7 years. The history of various funding options can be found in publications such as Morningstar and Lipper Analytical Services.
4)If purchasing variable annuity look at the track record of the funding options. Look for strong returns over a 3-5 year period or more. Research the rankings of various funding options on a regular basis. Past performance is not a guarantee of future results. Look for a range of funds to diversify your retirement savings as your needs change.
5)Check your insurance company?s rating. Insurance rating companies include A.M. Best, Standard & Poor?s and Moody?s. It?s a good idea to choose an annuity from a company that gets high marks from at least two independent rating sources.
Please note that we know not all insurance companies sell annuities.