Christie Administration Alerts Consumers About their Rights When Buying Annuities

TRENTON, N.J., April 5 -- The New Jersey Department of Banking and Insurance issued the following news release:

Department of Banking and Insurance Commissioner Richard J. Badolato today provided tips to consumers who are considering purchasing annuities. An annuity is a contract in which an insurance company agrees to make a series of payments in return for a premium (or premiums) paid.

Buyer's Guide Required

"When considering an annuity purchase, New Jersey consumers should make certain they receive a Buyer's Guide that educates them about the different types of annuities sold, how they work, their common features, and some questions they may want to ask," said Commissioner Badolato.

Annuities can play an important role in long-range retirement planning, depending on a retiree's situation. However, annuities should not be considered an appropriate investment for short-term financial goals. Many annuities are contracts for payments from the insurer that will be deferred for a period of time and then collected in a single sum or for a number of years starting at a date in the future. Annuity contracts often provide that if the purchaser wants to "surrender" - that is, cancel the contract early for a return of the value of the annuity policy to date, then the insurer may impose a surrender charge, or penalty, that is typically a percentage of the account value of the annuity. Annuity contracts vary as to how long these surrender charges will apply. Individuals close to retirement or in retirement should be especially wary of tying up significant funds in deferred annuity contracts with surrender charges that extend beyond 10 years from the date of purchase, or if they anticipate a possible need to access large portions, or all, of the annuity funds during the period of time when surrender charges will apply.

Disclosure Statement

New Jersey annuity shoppers who evaluate their long-term financial goals for retirement and decide to include an annuity as part of their retirement planning should know their rights under State law. In addition to the Buyer's Guide, the insurer is required to provide the buyer with a disclosure statement detailing how the contract works, the contract fees, expense charges, surrender charges, minimum interest rates and tax penalties.

Free Look Period

In addition, New Jersey annuity consumers have a 10-day free look period. This provides the buyer with the right to return the contract and receive a refund of all premiums paid, for any reason. The free look requirement is explained in both the Buyer's Guide and the disclosure statement.

Suitability Review

Consumers should be aware of a company's obligation to perform a suitability review prior to selling an annuity product. This review determines if the annuity product under consideration is suitable based on the customer's financial condition and goals.

Additional Information

"Consumers may have particular questions once they review the disclosure statement and contract," said Commissioner Badolato. "It is important that annuity shoppers make sure they understand everything in the contract and ask as many questions as necessary until they do."

For additional information on Annuities, go to: www.insurance.insureuonline.org/consumer_life_fda_ten_tips.htm

For a sample Buyer's Guide for Deferred Annuities, go to:

www.state.nj.us/dobi/division_insurance/pdfs/naicdeferredannuities.pdf

To make an inquiry or file a written complaint with the Department, consumers may go online at www.state.nj.us/dobi/consumer.htm or call the Department at 1-800-446-7467 or 609-292-7272.