How Do You Compare Annuities and Understand What You're Actually Buying?
Annuity illustrations and contracts can contain a lot of information. Understanding the differences in benefits, guarantees, riders, charges, and contract terms can help you ask better questions before making a decision.
Schedule a Qualification CallEducational information only. The initial conversation does not constitute a recommendation to purchase any particular annuity or financial product.
Two Annuities Can Look Similar at First
Comparing annuities is not always as simple as comparing an interest rate or an income figure. Different contracts may use different features, assumptions, charges, and guarantees.
Illustrations
Understand what an illustration assumes and which values are guaranteed versus non-guaranteed.
Contract Features
Look at the provisions that determine how the contract operates, including applicable riders and benefits.
Costs & Charges
Review applicable fees, surrender charges, rider charges, and other costs described in the contract.
Guarantees
Identify the contractual guarantees and understand the conditions and limitations associated with them.
The goal is understanding. A meaningful comparison starts with knowing what each contract actually provides and under what conditions.
What Is the Illustration Actually Showing You?
An annuity illustration can contain several different values and assumptions. Knowing which figures are contractual guarantees and which depend on assumptions can make the comparison easier to understand.
Guaranteed Values
Identify the values and benefits that are contractually guaranteed, subject to the terms of the contract.
Non-Guaranteed Values
Understand which illustrated values depend on assumptions, credited rates, or other factors that may change.
Income Projections
Look at how projected income is presented and what conditions apply to the illustrated amounts.
Underlying Assumptions
Review the assumptions used in the illustration rather than relying on a single projected number.
Look Beyond the Headline Numbers
The features attached to an annuity can affect how the contract operates over time. A careful comparison looks at what each feature provides, what it costs, and the conditions that apply.
Income Riders
Understand what an income rider is designed to provide, how its benefit is calculated, and what conditions apply to using it.
Guarantees
Identify the benefits that are contractually guaranteed and review the terms, limitations, and conditions associated with those guarantees.
Death Benefits
Review how the contract addresses death benefits and understand how the applicable benefit is determined under its terms.
Contract Terms
Consider surrender periods, withdrawal provisions, charges, and other terms that may affect how the contract can be used.
A feature is only part of the comparison. The important question is how the feature works within the complete contract and whether it aligns with the objectives being considered.
What Does the Contract Cost — and What Are the Terms?
The cost of an annuity is not always represented by a single fee. Depending on the contract, there may be charges, surrender provisions, rider costs, withdrawal limitations, or other contractual terms to consider.
Compare the complete contract. A lower or higher stated rate, income figure, or benefit by itself does not describe the entire contract.
The Contract Is Only Part of the Comparison
When comparing annuities, it can also be important to understand how the contract addresses beneficiaries and the financial strength of the insurance company issuing the contract.
Death Benefits
Depending on the contract, an annuity may include provisions that address what happens to the contract or applicable benefits after the owner's death.
- Understand who may receive the benefit.
- Review how the benefit is determined.
- Understand any conditions or limitations.
- Consider how the provision fits your overall objectives.
Financial Strength
Annuity guarantees are obligations of the issuing insurance company. Reviewing available financial-strength information can therefore be one consideration when evaluating an annuity.
- Identify the insurance company issuing the contract.
- Review relevant financial-strength information.
- Understand what ratings are intended to indicate.
- Consider the information alongside the complete contract.
One comparison point doesn't tell the whole story. Contract features, guarantees, costs, financial strength, and your individual objectives should be considered together when evaluating an annuity.
Have Two Annuities You're Trying to Compare?
If you're reviewing different annuity options, the details can be difficult to evaluate on your own. A conversation can help you identify the questions that may be worth asking about the contracts, illustrations, features, costs, and guarantees.
Schedule a Qualification CallNo obligation to purchase or change any financial product.
A useful comparison may include:
- Illustrated and guaranteed values
- Income features and riders
- Fees and applicable charges
- Surrender and withdrawal provisions
- Death benefit provisions
- Contract terms and conditions
- Financial-strength information
Educational information only. This material is not intended to provide individualized investment, insurance, tax, or legal advice. Any recommendation would depend on an individual's circumstances, objectives, and the information available at the time of review. Guarantees are subject to the claims-paying ability of the issuing insurance company.