How To Avoid Being Scammed By Those Selling Annuities
It is important for prospective annuity buyers to understand the annuity fully before they commit to purchasing it. As you have likely already learned, there is somewhat of a stigma associated with the purchase of an annuity product. For better or worse, the media and internet has latched onto this insurance product and torn it to shreds. The fact of the matter is, the annuity can still be a very useful and productive financial tool when used properly. It is important therefore to understand how to avoid being scammed by those selling annuities.
This problem has to be separated into two separate parts. There are insurance licensed professions that sell annuities, and there are annuity or settlement owners who are looking to sell their annuity payments or contracts. These are two different threats and should be distinguished as such.
If an insurance agent or financial professional is being prudent and treating his clients with a fiduciary duty, it is imperative that they act in your own best interest. Unfortunately we do not live in a world where everyone does what they are supposed to do. As such, it is important to recognize that there are professionals licensed to sell annuity contracts that may not be honest in their sales practices.
An annuity should be suitable for the individual that is purchasing it. It should make financial and logical sense to the investor and be treated like any other product on the market. An annuity is not a wonder product, but it certainly has its uses. Another important distinction to make is that not all annuities are created equal. Each company will typically have a wide assortment of annuity types, each of which will function differently and respond to market changes in their own distinct way. Between companies the distinctions may be even bigger.
A key point to understand with this sort of product is that it often carries a higher commission rate than other financial or insurance products do. This has led to greedy and immoral advisors abusing their clients by selling annuities that are not appropriate for the individual's circumstances.
Before you finalize your annuity purchase, you should make sure that you fully understand what you are getting in the product. The finer details are what will make or break the success of the product. If the advisor is unable to adequately explain the benefits as well as the disadvantages of the product, you will often be better off simply walking away from the situation. Find a planner that will be straight with you, and is not out to make a big commission by selling annuities to you.
Annuity contracts are often criticized for their inflexibility when you need to take money out of them prematurely. They often have steep withdrawal penalties which make it difficult to change your mind once the annuity is put into place. Understanding this one fact will go a long way to protecting you from dishonest financial planners.
If you are uncertain of what to look for in a fixed annuity, we suggest brushing up on a couple of articles we have here at the Life and Health Guru. Make sure that you understand the product you are buying before your agents sells you on it. An annuity can be a powerful and effective planning tool when it is used properly. Make sure that it is suitable to your circumstances before you buy it and you will protect yourself from attempts to scam you out of your money by selling annuities you don't need.
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