Annuities can provide you with a regular and reliable stream of income in your retirement. At the same time, annuities also have unique risks and drawbacks. They are not the right investment for everyone.
Unfortunately, many agents tend to sell annuities to unsophisticated consumers – the elderly in particular – without disclosing the risks involved. Such sales tactics are prohibited by law, as life insurance agents and securities brokers have a duty to disclose all material risks to their clients.
If they fail to do so and you suffer financial losses, you can take action against them with the help of an annuity fraud attorney.
Four Signs of Annuity Fraud
#1 The Rushing Tactic
If the agent rushes you to buy an annuity, it is always a bad sign. If they tell you that you need to buy it right away without giving you enough time to think it through, you should seek a second opinion or contact an attorney before signing anything.
#2 Not Disclosing the Details
Life insurance agents and securities brokers are required by law to disclose the risks associated with investing in annuities. Variable annuities, particularly, are considered high-risk investments because they can lose money, and the ultimate value and payout are entirely dependent on non-guaranteed market performance.
Another major disadvantage of variable annuities is the fact that they are classified as securities and are usually subject to a rule that forces the owner to litigate any dispute before the Financial Industry Regulatory Authority, or FINRA
If an agent has sold you a variable annuity without disclosing that you can suffer significant losses, you may be a victim of annuity fraud. In such a scenario, you should consult an experienced annuity lawyer to find out if you can take action against the agent and recover damages.
#3 Not Telling You About the Surrender Period
Almost all deferred annuities have a surrender period. If you withdraw your money or cancel your annuity during this period, you will usually have to pay surrender charges, which can be quite significant. You may also have to pay tax penalties if you are under retirement age.
If you are an elderly person whether or not you suffer from a chronic or critical disease, locking up your money for a period of time may be a bad idea, especially if you do not have any other source of income. Sales agents are obligated to tell you about the surrender period and the charges and penalties involved for making withdrawals.
#4 Churning and Twisting
Churning or twisting are terms for a fraudulent practice wherein an agent convinces you to surrender an existing annuity to buy a new one, thus incurring surrender charges. The usual purpose of the sale is to generate commissions for the agent.
There are laws in place that required not only agents to disclose the advantages and disadvantages of the purchase. In most of these cases, the agent’s commission is the only real reason for the sale. Many insurance companies have added riders to their products that purport to compensate the purchaser for surrender charges incurred when they exchange an existing annuity for a new one – such riders rarely, if ever, provide sufficient compensation, and they usually also increase the annual expenses of the product, resulting in a significant net loss to the client.
Contact an Experienced Annuity Attorney Today
If a salesperson attempts to persuade you to buy an annuity that does not suit your financial needs, you should get a second opinion, or seek advice from an annuity fraud lawyer who can help you take action against the agent or broker responsible.
Benjamin Blakeman has more than 40 years of experience as a business litigation attorney. His practice, Blakeman Law, has focused exclusively on life insurance and annuities for the last 13 years. He was active in the life insurance industry for 7 years. He understands life insurance and annuities from the inside out and can provide you expert legal advice on life insurance, annuities, and financial elder abuse. To schedule a consultation, call us at 1-888-270-0051 or complete our online contact form.