A Messed Up Annuity

Lots of people over the years have called me asking about an annuity they own but don’t understand.  I didn’t sell any of them so how am I supposed to know?  But it’s one of the reasons why I have done so much research on this topic and the primary reason behind my recommendations.  Buy confidently and with the ability to explain it to anyone who asks.

Buying an annuity has to be done with a purpose.  Any contract you own should be meant to solve a problem and give you peace of mind.  In the case I’m going to talk about, the purpose could not have been more clear.

Arnold called me about three years ago, just a few weeks before I went on my fall elk hunting trip.  He had a very specific request.  His wife had never had to worry about financial stuff and he wanted to make sure it stayed that way, no matter what happened to him.

Arnold was 74 years old at the time and was happy to continue working as long as he lived.  If something were to happen to him, he wanted to make sure that his wife would have continued cash flow to maintain her lifestyle.  This was one of the rare cases where a client didn’t care about fees, growth or expenses, just the guaranteed income.

It was a simple job for me.  I just built a spreadsheet using the highest quotes from all companies to show Arnold what was available under all scenarios.  He wanted to know primarily what was available with single life payouts on his wife and joint life payments if he did decide to retire.

Using the grid I built we were able to find the most profitable payment in the most likely scenario he could predict.  We went with a contract from AIG and made sure to title the application correctly so that Arnold or his wife could choose the payout option that was most beneficial no matter what happened.

This came at a pretty memorable time in my life so it was easy to recall the circumstances.  We poured through that contract to verify every detail of what we had been told and he bought it.  I made a nice commission and Arnold got everything he asked for.  Life was good for both of us.  

Well, a couple weeks ago, Arnold called to verify the payments that were listed on his annual statement.  He was also thinking about buying another contract.  It was late in the day so I promised to call the next day and give him verified information.  This was also the opportunity for another nice sale so there’s no way I’d pass that up.

I called AIG and sat on hold multiple times and probably wasted more than an hour doing so.  Each of the first two calls was interrupted by something else more pressing and it took a third try to connect with someone who could get me the numbers.  It was amicable at first but it didn’t take long for me to realize there was a problem.

The statement showed single life payment options for Arnold alone, meaning if he died first his wife would be left with a minor residual value that she would then have to take.  Upon my request to get figures for other payout options I was told that there was nothing else that could be done with the contract.  He couldn’t take single life payments on his wife and not even joint life payments for the both of them.  The information from the company suggested that his only option ran contrary to the purpose of buying the contract in the first place.

This was a big problem for me and it ended up causing me to lose sleep.  In the past I had stated his options and was now being told that I had made a mistake.  It was not my mistake but I would be the one to take blame.  This infuriated me for several reasons that I explain in the podcast. 

My information on most contracts comes from a third-party marketing company.  With few exceptions I get all information from a source other than the insurance company itself.  The grapevine effect can cause harm with lasting consequences so a buyer or agent has to be alert.  In this case it was a contract I rarely sell so I relied upon information from the third party broker to get the deal done.  

Nearly three years after the fact, I called the company to verify what had been sold nearly three years prior.  The result was conflicting information.  Regardless of all the due diligence we did three years ago, the answer I got this time made me question my own homework.  The only answer to that is to litigate the matter based on emails or prove I’m right in the actual contract.

While we don’t hope for litigation to get a guarantee, I will go to any lengths necessary to defend my clients.  It sounds serious but it was fairly easy to prove that I had received bad information when I called the company just days before.  All I had to do was read the contract a second time to verify that things had in fact been done correctly.

I’m not trying to scare anyone but it’s a good lesson for anyone who wants to know what they are buying.  Many stories over the years have come to my attention that don’t have such a happy ending.  I go into much more detail in the podcast so check it out if you want to hear me tell the story.  You can get it here…

Trust only yourself and don’t let anyone, not even me, tell you what to do with your money.

Podcast about A Messed Up Annuity

Today, Bryan shares his experience on how he handled a messed-up annuity. Listen throughout the end and find out how he problem-solves the situation.

What You’ll Learn From This Episode: 

[2:02] Some people have little to no understanding of what they own

[5:31] When buying Annuity contracts, you have to select what your desired payout option is going to be

[10:56] Reading through the annuity contract and fixing the problem

[16:14] The importance of learning to read the contract deeper and understanding it throughout

Key Quotes: 

[3:44] “All I want is a guarantee, the rest of it doesn’t matter.”

[16:25] “If you’re getting into a competitive income scenario, those change all the time.”

[17:00] “A messed up annuity isn’t messed up at all.”


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Last Updated on February 8, 2024 by Bryan Anderson