An Introduction to Annuity Sales

2007-03-08 10:33:40

( Insurance )



Annuities are contracts issued by life insurance companies that supply a stream of income for a pre-set period of time. The earnings produced by the contract are usually tax-deferred.

Annuities may seem to be cheap compared to the advantages offered, but you will still need to scrutinize the deal that is being offered to you. Some annuities are anything but cheap, with many hidden costs. Annuities can be quite complex, and if you are not well informed you are sure to encounter problems. For example, annuities have higher fees compared to other investment products; this may negate any tax advantages offered. Opportunity costs can also be high. Most annuities tie up your money for a good number of years and charge a penalty if you withdraw your investment.

Annuity sales are very lucrative for salesmen, so you should be doubly careful when investing in an annuity. Annuity sales now reach yearly sales running into billions of dollars. To avoid making a bad investment, be sure to do your homework before you spend any money. You need to get the facts and study the details of the annuity being offered to you. Does the annuity serve your particular needs, or will it be an unnecessary expense?

Senior citizens and retirees should be especially careful. Retirees are often targeted for annuity sales because of their retirement money. Older people often have many fears with regards to their finances, and many salesmen take advantage of this to make annuity sales.

Before you invest in an annuity, be sure to answer these questions:

Why should I use this annuity? You need to identify why you need to use this investment vehicle. Is it a better alternative to other investment products, such as money market funds or certificates of deposit?

How much of a commission will the bank/salesman be earning on the annuity? Keep in mind that annuities are good investments for some people, but it is not for everyone. Banks and salesmen earn a hefty commission of annuity sales, so they may have ulterior motives in recommending annuities to you.


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