Annuity Companies: How to Find the Right One For You

Annuities are typically offered by insurance companies.  For one, these companies have experience in catering to pre-need requirements like pension funds, death benefits and accident insurance.  Before you start looking for providers, you must first decide on the type of benefits you need. The best provider will be the one who can offer a plan that will meet all your needs. 

During the accumulation period, annuity premiums are invested by the insurance companies to generate revenues to fund future payouts to annuitants.  If these investments suffer heavy losses in the market, it is possible that one specific type of annuity, variable annuities, could lose value.  An insurance company with a good investment track record can help minimize this risk.

The most important thing to look for in a plan provider is its ability to meet all your investing needs.  There are many insurance companies with proven track records like Allianz Life, Aviva Life, and North American Life.   However, not all may offer the types of plans that you need.  Limit your options to those that can. 

Study the various annuity products these companies offer.  Request a prospectus on all of the products you are interested in. This will allow you to understand all of their features even before you meet with the insurance company’s sales representative.  Then you can request a free, no-obligation consultation session with them or with an independent advisor.  Ask questions on prevailing rates and the more popular plans they offer.

Compare the annuity products of roughly the same offered benefits and features with particular focus on your requirements. Decide whether you need just one annuity that has all the benefits you need or perhaps several annuities each serving a particular purpose.  The latter may prove to be more cost-efficient in some cases. For example, you could buy a combination of fixed and variable deferred plans.  After all, there is no limit on the number of policies you can own.

Whatever direction you decide to go, however, try to stay within your set investment goals.  Although you may later opt to exchange annuities later through the 1035 provision of the Internal Revenue Code, this move may entail additional expenses and tax implications.

Remember, this is your money and you’ve worked hard for it.  Take all the measures and precautions that are necessary to ensure that it is safe with the company you trust.  Check the financial profile of the company and its past performance, particularly with respect to the product you intend to buy from them.  Find out if they have encountered difficulties paying for claims in the past.

Additional protection against business risk and mismanagement may be secured through third parties like the Securities Investor Protection Corporation.  You may also refer to ratings on insurance companies provided by independent entities like AM Best, Standard and Poor’s, Moody’s and Fitch.  Companies are researched and rated based on financial strength and stability.  It always helps to be very cautious, especially when it comes to your future.

Annuities are best suited for long term investors.  Any withdrawal prior to age 59 ½ is subject to a 10% tax penalty as well as regular income tax.  Annuities often also have a surrender schedule, meaning that withdrawals may be subject to a penalty by the insurance company if not left in for a predetermined amount of time.  Any guarantees on principal invested are based upon the claims paying ability of the underlying insurance company.