As a general rule, investment performance for the last ten years has generally been mediocre. This is true not only for most individual investors, but also for many institutional investors and insurance companies. From early 2000 through 2007, the insurance industry sold a significant amount of variable annuity contracts that included a guaranteed minimum income benefit (GMIB) feature. With hindsight, the insurance industry (as a whole) is realizing that it often materially mispriced those contracts – in favor of the annuity owner. Most companies have since changed their pricing and feature models on their more current contracts. For the older contracts that are “locked in”, some companies are even making unsolicited cash-out offers, in an effort to entice those annuity holders to exit their (the remaining companies) “problem” contracts.
It would indeed be the rare annuity contract holder that truly understands the provisions and nuances of his/her 2000 to 2007 years’ contracts (and the insurance company is absolutely not going to tell them how to take advantage of those contracts). Such annuity holders can significantly and substantially better his/her overall related gain, if informed on how to do so. This is truly an area where what you do not know can hurt you.
We believe the insurance company and industry (as a whole) is intentionally not explaining the opportunities and benefits an owner could derive from those contracts. Why? Because, if the individuals knew, it could be very good for the annuitant – but bad for the issuing insurance company. As an industry, they are obviously looking out for #1 (i.e., the insurance companies).
Provisions and elections that may need to be addressed will probably relate to current and future income flow. If the annuity carries a “Guaranteed Minimum Income Benefit” rider, this type of rider allows you to receive income distributions, while still preserving the principal for a future lifetime income stream. We will be looking for any income stream that may be available, while still maintaining a level death benefit amount. Some contracts give very specific restrictions regarding withdrawal amounts and any withdrawal exceeding the limits can cause the beneficial contract clause to be lost.
Other contracts have riders with “expiration” dates that, effectively, require you to “use the benefit or lose it.” Annuities can be costly products and failure to be familiar with the details can result in costly mistakes. For example, there are often investment restrictions attached to income riders. Investment in a conservative fixed-income fund may reduce or even nullify income guarantees in the contract. A major issue that will be reviewed is ownership of the contract. Many annuity contracts allow for a “spousal” continuation at the owner’s death. This can be a crucial income source for the remaining spouse. (Be careful because this provision probably is not available in the annuity contract; however, you can be sure that the company is not emphasizing some of the less favorable (for the company) aspects of their produce. Thus, all of this is further complicated by the difficulty in just getting the appropriate information from the insurance company. Such information is often being legally – but, we believe, all too often intentionally and deliberately provided in a misleading and/or an entirely missing fashion. Also, some of these contracts only have periodic “windows” to make certain decisions and some of these “windows” are extremely short – as little as 72 hours, per year.
If you or a loved one recently sold your Guaranteed Minimum Benefit annuity back to your annuity company, call Soreide Law Group and speak to an attorney at (888) 760-6552, or visit our website at https://www.securitieslawyer.com.CONTACT US