Five Myths about Indexed Annuities: Part 1

By Jim Poolman

If you’ve read anything about indexed annuities, chances are pretty good that not everything you’ve read is true. Each day this week, we will tackle a common misconception about indexed products. Keep reading to make sure you’re getting the real facts!

Myth: Indexed annuities are sold using unethical and unfair practices

Truth: The industry and state regulators have put a number of protections in place to ensure indexed annuities are sold ethically and fairly to consumers. These protections include the following:

  • Indexed annuities are subject to strict suitability rules, established by The National Association of Insurance Commissioners (NAIC), which mirror the Financial Industry Regulatory Authority (FINRA) suitability standards for investment products.
  • Every company is required to review every sale to make sure that the product is suitable for the consumer.  The assessments take into account factors such as age, assets, income, tax status, and financial needs and liquidity requirements of the consumer.
  • Insurance agents that sell indexed annuities are mandated to participate in product-specific training that is far more comprehensive than the sales product training for securities brokers, such as mutual funds.  Insurance agents must complete a four-credit-hour training course approved by the state’s department of insurance and taught by a regulator-approved education provider.

Tomorrow: Learn how indexed annuities perform compared to other investment vehicles.

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