5 Characteristics of a Dependable Annuity Company
When we talk about annuity companies, what we really are talking about are insurance companies. Insurance companies sell annuities, either directly or through independent agencies. Many independent agencies that offer retirement planning services use annuities to help their clients meet their financial goals in retirement.
When you are thinking about making a long-term financial commitment, you want to find a dependable annuity company that will treat you fairly. You don’t want to be talked into buying an annuity product that is not right for you. If you ever get the impression that the representative sitting across the table from you is nothing more than a fast-talking salesman looking to make a big commission, don't sign anything! You should never feel pressured to buy any product that doesn’t fit your needs.
Insurance is a highly regulated business and reputable companies that sell annuities follow the rules and do not cut corners. If you are interested in purchasing an annuity, look for annuity companies that have the following characteristics.
1. Strong balance sheet
The financial strength of any company is a good indication of how well that company is managed and how well it performs. When you buy an annuity, you are buying it from an insurance company or an agent authorized to sell the annuity products offered by an insurance company. While you might not be able to go up to a representative of an annuity company and demand to see its financial statements, there are other ways of finding out about the company’s financial strength. Most insurance companies are publicly traded companies with shareholders. They are required to file annual financial reports and you can review those reports. In addition, life insurance companies are assigned a rating for financial strength by rating agencies like Moody's Investors Services, Standard & Poor's Insurance Rating Services, Fitch Ratings, and A.M. Best Company to name a few. You'll want to take a look at how these agencies rate the insurance company.
2. Well established
Even if you don’t go to the trouble of checking the financial statements of annuity companies, you can judge the dependability of a particular company by noting how long it has been in business. One-hundred-year-old insurance companies have weathered many storms like The Great Depression and The Great Recession, which can be an indication of a solid company. While being well established is a positive, this does not mean that a relatively new annuity company cannot be dependable.
3. Number of satisfied customers
As an individual, it may not be so easy to determine the percentage of clients who are satisfied with their annuity company. However, through word of mouth and comments made on social media sites, you can get a sense of whether a company has a good or a bad reputation. You can check with your state’s insurance commission to see if the company has a clean record or an inordinate amount of complaints.
4. Diversified list of annuity products
If a company sells only one or two annuity products, it is possible that it will try to sell you one of those products even if it is not appropriate for your retirement or long-term income needs. Independent agencies are often the best place to look for the best annuity for your situation. Independent agents can shop and compare hundreds of annuities from dozens of the most reputable annuity companies. Also, products can vary from state to state, so it is important to work with an independent agent familiar with the contracts and riders available in your state.
5. Representatives who are willing to explain everything
You have probably already heard that annuities are complex financial instruments that are not easily understood by the general public. While you may understand the general concept about paying a chunk of money today and getting regular monthly payments in the future, there is much to learn. You should know how the interest rate, fees, and surrender penalties are calculated. You should know about the many different types of riders that are available and the cost of including those options in your annuity. There are many details that can only be explained by a professional who understands the intricacies of all different types of annuities. When you are buying an annuity, your agent or representative must be willing to explain everything and answer all of your questions to your complete satisfaction.