How To Avoid Annuity Scams And Bad Sales Pitches

Every week, people call after being burned by a bad annuity sale. They are angry, confused, and frustrated because what they were promised does not match what they bought. The problem is not the product. The problem is how it was sold.

Annuities are contracts, not miracles. When someone tells you that you can get stock-market returns with no risk, that is not a product, that is a fantasy. Let’s talk about how to spot those red flags before they cost you money.

The Real Source of Most Annuity Complaints

Most complaints about annuities are not about the contract itself. They are about misrepresentation. The agent sold the dream, not the guarantee. They led the client to believe the annuity would “grow like the market” or “beat inflation.”

The truth is that no annuity will ever beat the stock market long term, and it is not supposed to. Annuities exist to provide guarantees. When you forget that, you become a target for sales hype.

If you understand what you are buying, you will never have a complaint. The contract always tells the truth. The sales pitch is where the lies hide.

Four Red Flags That Should Make You Walk Away

1. The “Bonus” Trap

If an agent focuses on a big upfront bonus, be careful. Most of those bonuses are smoke and mirrors. They are tied to long surrender periods or payout formulas that you cannot touch without penalty. The only number that matters is the one written in the guaranteed section of the contract.

2. “Zero Is Your Hero”

You will hear this line in almost every Indexed Annuity pitch. It means you will not lose money in a down market. That part is true, but it ignores the rest of the story. Your upside is limited, your cap can change, and the carrier decides how much of the index return you actually get. “Zero is your hero” is not a feature — it is a limitation.

3. The “This Product Beats Inflation” Claim

No private annuity perfectly tracks inflation. Anyone saying otherwise is misleading you. You can add a cost-of-living adjustment or use income riders, but none of that guarantees true inflation protection. Only Social Security does that.

4. The “Trust Me” Pitch

If someone refuses to show you the contract or glosses over the fine print, stop the conversation. You never buy the personality, you buy the paperwork.

What To Do Before You Sign Anything

Always get multiple quotes. Every annuity carrier prices their contracts differently, and the same type of product can produce drastically different outcomes.

Ask for the full contract and read the guarantee section. Make sure the words “guaranteed,” “surrender schedule,” and “income start date” make sense to you. If you do not understand something, ask until you do. If the agent cannot explain it clearly, walk away.

A legitimate professional welcomes your questions. A bad one gets defensive.

How To Protect Yourself From Annuity Fraud

True annuity fraud usually happens when money never reaches the insurance company. That is why you should always make the check payable to the carrier, never to the agent or their firm. Verify the license of anyone selling you an annuity on your state’s insurance department website.

If a deal sounds too good to be true, it always is. Real annuity guarantees are boring by design. The excitement comes from peace of mind, not hidden promises.

The Bottom Line

Annuities are fantastic tools when used correctly. The problem is not the product, it is the pitch. Do not blame the hammer for the person swinging it the wrong way.

Before you buy, remember this rule — you own an annuity for what it will do, not what it might do. Guarantees are in the contract. Period.