Can Indexed Annuity Companies Change the Rules?

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Welcome to Q&A Friday. I'm your host,

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Stan, the Annuity Man, America's annuity

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agent, licensed in all 50 states.

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Today's question is a very good one and

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a hot topic. Can annuity companies that

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offer fixed index annuities, can they

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change the rules on the index option

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strategies? Very good question and very

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complicated answer, unfortunately. Now,

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with index annuities, they were they

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were put on the planet in 1995 to

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compete with CD returns, and that's kind

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of what they do. Um, historically, um,

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they're not market return products. I

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don't care what anyone shows you or

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tells you. And one of the things that is

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an issue that you need to understand,

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and it's just part of how the the index

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annuity uh, product works, these index

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options can change. The rules can change

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on the caps, spreads, participation

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rates, etc. on in essence how the gains

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are calculated. They can change and be

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changed at the annuity carriers

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discretion with most products. Give you

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an example. If there's a one-year

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option, let's say on the S&P with most

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carriers, that means year two, year

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three ongoing, they can set the rules on

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what those caps spreads and

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participation rates are. If you buy a

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two-year option or a three-year option,

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some some carriers offer that, then

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those those cap spreads and

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participation rates are locked in for

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that term. But what I always tell people

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is be very careful with index annuities

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from a accumulation value strategy

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because let's just say it's a 10-year

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surrender charge and it's a one-year

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call option. That means you're really

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buying a one-year guarantee with a

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10-year surrender charge. And some

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carriers are not proconsumer, as we

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might say, on their what's called

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renewal rates, meaning they do change

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the rules and and a lot of times it's

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not in your favor. A a lot of carriers

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are in your favor and they change them

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in your favor. And there's some we're

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seeing now that are given a um even

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though it's a one-year call option or

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two-year call option, they're locking in

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that cap spread or participation rate

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for the duration of the surrender

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charge. Those are few and far between.

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But one of the questions you need to ask

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number one is why are you buying an

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index annuity? Because it's if it's for

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market growth, no, please don't. And if

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it's for the upfront bonus, that's candy

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for the stupid, please don't. If it's

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for to pro protect the principle and get

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get market returns, don't because that's

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a sales pitch. Um do but ask do do the

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option choices and cap spreads and

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participations rate rates change and if

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so when and how you know how often is

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that one year every one year two year

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whatever and is it at the carrier's

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discretion. First of all if the agent

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can't answer that that's a problem.

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Second of all, you should be using us at

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theanuityman.com so that we can shoot it

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straight with the index annuity story

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and you're not just buying some sales

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pitch and pie in the sky nonsense. But

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the bottom line is understand this and

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here's the question. Can annuity

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carriers

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change the index option strategies cap

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spreads and participation rates at their

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discretion? The answer is most of them

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can. Most contracts for index annuities,

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they can change those rules. So, it

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might be prudent for you to contact us

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and find out the ones that can't change

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the rules and the ones that we feel are

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proc customer from the standpoint of how

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they price those index option

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strategies. Be careful out there. As I

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always say, if you can't explain it to a

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9-year-old, no offense to

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nine-year-olds, don't buy it. And the

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last thing, and you know this, but I'm

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going to say it again. If it sounds too

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good to be true with indexed annuities,

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it is every single time without

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exception. And I'm one of the biggest

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index annuity proponents on the planet,

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but only if they're explained correctly.

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Just remember, they're CD product, not a

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market product. Even though you would

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hope it would be a market product, it's

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not. That's Stan the Annuity Man Q&A

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Friday. Sees the day, sees the weekend.