Equity-Indexed Annuities
Equity-indexed annuities (EIA) are complicated investments sold
by insurance companies that guarantee investors a minimum return
if the contract is held to maturity. Many EIAs are deferred
annuities that take up to 15 years to mature and which carry
extremely high surrender charges if cashed in before the
maturity date. This leaves the purchaser of the annuity with the
difficult choice of either waiting for the annuity to mature or
paying the exorbitant surrender charge. For most Senior Citizens
deferred EIAs are poor investments that are ill-suited for their
financial needs. With surrender periods of 15 years or more,
this can exceed the average life expectancy of most senior
annuity purchasers.
The number of EIA annuities sold in the past few years has
increased dramatically rising from $23.4 billion in sales in
2004 to almost $29 billion in 2005. This is primarily because
the sales commissions that agents or brokers are paid for
selling equity-indexed annuities are typically much larger than
commissions paid on mutual funds and variable annuities. Loose
regulation has also played a prominent role in the explosion of
EIA sales. Technically, they aren't securities, but because they
are tied to the stock market, they aren't purely insurance
products, either. Because of the unique structure of
equity-indexed Annuities they are not subject to suitability,
disclosure and sales practice requirements that would otherwise
apply. The wide variety of indexing methods used to calculate
the index-linked interest rate makes it hard for investors to
predict payouts from their EIA and to compare one EIA to
another.
The sale of EIA annuities has resulted in a number of lawsuits
and regulatory actions around the country calling into question
the sales and marketing practices surrounding the products, the
harsh penalties for withdrawing money early, the extremely large
commissions paid to agents and the poor financial performance of
the annuities. These annuities were frequently marketed to
Senior Citizens at seminars called "Estate Planning," "Wealth
Building," or "Senior Seminars." Typically, at these seminars
seniors were induced to purchase these deferred annuities after
being misled to the "benefits" of these annuities, which often
include the promise of "cash bonuses" and large "tax benefits."
In many cases, older investors were induced by sales agents to
surrender or borrow against life insurance policies in order to
buy the deferred annuities.
If you are a Senior Citizen who purchased a deferred
equity-indexed annuity from Midland National Life Insurance
Company or AmerUS Group Company which you believe is unsuitable
for your financial needs, please call us toll free at
1-888-933-1514 or email us at
info@beltlawfirm.com.
