No Defined End of Term

Okay, so here is the situation. The attorney general in the state of New Jersey is cracking down. They are banning annuities that have what is called a two-tier annuity products and furthermore, they are looking to do the same with annuities that have surrender charges in excess of 10%.

Now, as far as two-tiered annuities, they have no defined end of term. This means that no matter how long you keep the money in, it has to stay in until you 1) stay in for a defined period and 2) take your money out over a defined period. It calls for two sets of action in order to free yourself of a surrender charge. It is somtimes not a great deal for the client.

One company who was hit by this legislation was Allianz. In fact, some of their products operate this way. As a result, some of their portfolio is allegedly being pulled from the state of New Jersey. This is very interesting news in the annuity industry seeing that Allianz is the biggest seller of equity indexed annuities in the country. If this trend carries over to other states, Allianz may certainly take a significant hit in sales.

One thing I would like to clarify is this. My biggest problem with two-tiered annuities is that many brokers have no clue how to explain these to their clients. Furthermore, what's worse is for the most part, they DON'T explain it to the client. Therefore, the client may hold the annuity for a long time and come to find out they must take their money out over an additional period (usually 5 years). THE WORST PART IS, no matter how long they hold it for, they will never be able to take out their money without going through the second tier (by withdrawing the money over a certain number of years) without being assessed a penalty. AGAIN, my biggest problem isn't the way they work---it's that clients don't know that's what they are getting in to.

Well, it looks like the regulators are finally starting to target the insurance industry. Again, not every two-tiered is bad but knowledge is power. Keep this in mind as you do your homework on annuities.

For more information on what you need to know about annuities, please visit:

Annuities: The Shocking Truths Revealed (please click on the link)

Ignorance Is NOT Bliss