Clarity in Communicating the Fixed Annuity Value Proposition - Insurance News | InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home
Topics
    • Advisor News
    • Annuity Index
    • Annuity News
    • Companies
    • Earnings
    • Fiduciary
    • From the Field: Expert Insights
    • Health/Employee Benefits
    • Insurance & Financial Fraud
    • INN Magazine
    • Insiders Only
    • Life Insurance News
    • Newswires
    • Property and Casualty
    • Regulation News
    • Sponsored Articles
    • Washington Wire
    • Videos
    • ———
    • About
    • Advertise
    • Contact
    • Editorial Staff
    • Newsletters
  • Exclusives
  • NewsWires
  • Magazine
  • Newsletters
Sign in or register to be an INNsider.
  • AdvisorNews
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Exclusives
  • INN Magazine
  • Insurtech
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Video
  • Washington Wire
  • Life Insurance
  • Annuities
  • Advisor
  • Health/Benefits
  • Property & Casualty
  • Insurtech
  • About
  • Advertise
  • Contact
  • Editorial Staff

Get Social

  • Facebook
  • X
  • LinkedIn
National Association for Fixed Annuities
 Archive: National Association for Fixed Annuities
Order Prints
October 1, 2021 National Association for Fixed Annuities Views: 0
Share
Share
Tweet
Email

Clarity in Communicating the Fixed Annuity Value Proposition

By NAFA Sponsored By National Association for Fixed Annuities

For the past 18 months, Americans have had their lives turned upside down by the ongoing pandemic. It’s put uncertainty in the spotlight, as well as the critical need for future planning. In fact, 70% of Americans have seen the pandemic as a financial wake-up call, saying it has “caused them to pay more attention to their long-term finances.”1 As a result, we’re witnessing an incredible rebound in annuity sales. According to data from the Secure Retirement Institute, strong equity market gains and lower volatility — as well as rising interest rates — are all contributing factors to annuity sales reaching $129 billion year to date, a 29% increase over 2020.

Despite these encouraging statistics, we know that there is considerable need for annuity education. The word “annuity” still carries a stigma, and many annuity myths continue to circulate in the marketplace. One of the ones you’ve likely heard from clients is that annuities are too expensive. To combat this myth, start by helping them understand the difference between fixed and variable products.

Most fixed annuities assess no front-end or annually recurring charges. Meanwhile, they can offer a fixed rate of growth, or the opportunity to earn interest credits based on the performance of market index if a fixed indexed annuity might be in their best interest. While some products do offer riders that can be added onto the contract for an additional fee, this is clearly disclosed prior to the contract purchase. These riders may offer additional features and benefits beyond what the core annuity provides to address things like terminal illness provisions, enhanced guaranteed lifetime income benefits or inflation protection.

However, the insurance guarantees inherent to annuities and the promise to provide additional interest are not free and, therefore, are considered an expense to the insurance company. Other expenses and acquisition costs for these products may include product development, issuing costs, commission expenses, regulatory compliance and mandated reserve requirements. The beauty of fixed annuities is that these costs are baked into the contract and not charged separately or on an ongoing basis.

Finally, fixed annuities typically carry surrender charges. These may be imposed from two to 12 years, depending on the product design, and typically decline to zero over time. While those who don’t understand annuity products — or those who are actively trying to encourage clients to move money into managed accounts — may speak ill of surrender charges, the reality is that they are assessed ONLY when the annuity owner takes money out of the annuity. Most fixed and fixed indexed annuities allow the owner to take a defined amount of money out of the contract annually without paying any charges, but withdrawals over the maximum will be charged a penalty. Also, if one terminates his or her annuity contract early, before the charges have expired, a surrender charge is assessed.

In other words, surrender charges are a loss prevention tool used by the issuing insurance carrier to ensure the company remains profitable and solvent. This, in turn, keeps annuity purchasers protected while ensuring that all consumers receive the most competitive interest rate and annuity features possible, and that the insurers are adequately protected from a “run on the bank.”

With a growing number of consumers recognizing the need to protect a portion of their nest egg from market risk while locking in guaranteed income for life, it’s more important than ever we are prepared to educate clients about how these products work. NAFA is here to help. Download a complimentary copy of our newest resource to help clearly communicate why surrender charges are not only fair but necessary to provide the consumer protection clients seek.

 

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC.

1 The Four Pillars of the New Retirement: What a Difference a Year Makes, An Edward Jones and Age Wave Study: June 2021

Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Annuities are long-term vehicles to help with retirement income needs.

Older

“We’re not in Kansas anymore!”

Newer

Foresters Financial redefines the future of life insurance.

Advisor News

  • Study: How does flexibility impact life insurance purchase decisions?
  • Moms say they are fulfilled in the advisory industry
  • CFP Board convenes AI Working Group
  • Worldwide volatility fuels sharp decline in financial hope
  • Trump bill includes $1K investment account for newborns
More Advisor News

Annuity News

  • Could a bitcoin-based indexed annuity be in the future?
  • Annuities ‘can add a little juice to the retirement portfolio’
  • Annuity sales top $100B for the 6th straight quarter, LIMRA reports
  • Athene announces key leadership appointments
  • ‘Annuity King’ gets trial date for lawsuit against feds, Florida regulators
Sponsor
More Annuity News

Health/Employee Benefits News

  • NMDOH helps children catch up on vaccines
  • 'A Devastating Blow': Coachella Valley Health-Care Providers Brace for Federal Budget Cuts—and Many of Them Are Afraid to Speak Out
  • 2 appointed to Cone Health board of trustees. Hammock named senior VP of business
  • Oregon bill would force health insurers to cover non-opioid pain treatment
  • Walker: Why Medicaid reform is needed
More Health/Employee Benefits News

Life Insurance News

  • Everest Enhances Board of Directors with Appointment of Allan Levine
  • Credit Union Members Are More Likely to Have Ancillary Insurance Protections for Their Prized Purchases, Study Finds
  • Study: How does flexibility impact life insurance purchase decisions?
  • AM Best Affirms Credit Ratings of Everlake Life Group Members
  • AM Best Comments on Credit Ratings of Erie Insurance Group and Erie Family Life Insurance Company
More Life Insurance News

- Presented By -

Top Read Stories

  • Agent groups condemn United Healthcare eliminating commissions
  • Annuity sales top $100B for the 6th straight quarter, LIMRA reports
  • State of Alaska Department of Revenue Purchases 5,480 Shares of Costco Wholesale Corporation (NASDAQ:COST)
  • Worldwide volatility fuels sharp decline in financial hope
  • ‘Tough decisions’ on the way as California grapples with insurance crisis
More Top Read Stories >

NEWS INSIDE

  • Companies
  • Earnings
  • Economic News
  • INN Magazine
  • Insurtech News
  • Newswires Feed
  • Regulation News
  • Washington Wire
  • Videos

FEATURED OFFERS

Increase sales up to 30% with INN Academy
Master sales strategies from industry legends. Flexible learning, immediate results. Don't miss out—save up to 50% on enrollment today!

Press Releases

  • RFP #T01625
  • TAG Advisors Adds New Specialty Markets Leader Carmine LaCognata
  • Royal Neighbors of America Celebrates 130 Years
  • WealthFeed Partners with Wells Advantage Group to Empower Agents with Next-Level Prospecting and Insurance Solutions
  • Wichita National Life Implements Hexure’s FireLight to Power Annuity Sales and Market Expansion
More Press Releases > Add Your Press Release >

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Advisor News
  • Annuity Index
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • From the Field: Expert Insights
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Magazine
  • Insiders Only
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Washington Wire
  • Videos
  • ———
  • About
  • Advertise
  • Contact
  • Editorial Staff
  • Newsletters

Top Sections

  • AdvisorNews
  • Annuity News
  • Health/Employee Benefits News
  • InsuranceNewsNet Magazine
  • Life Insurance News
  • Property and Casualty News
  • Washington Wire

Our Company

  • About
  • Advertise
  • Contact
  • Meet our Editorial Staff
  • Magazine Subscription
  • Write for INN

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2025 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • InsuranceNewsNet Magazine

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.
Insurance News | InsuranceNewsNet