Before you buy an annuity, its important to know what type of annuity you want. While all annuities are issued by insurance companies, all annuity sales people cannot sell all types of annuities. If you want to buy a fixed or indexed annuity, you can purchase them from a life insurance agent. If you want to buy a variable annuity, you should talk to a stock broker or financial/investment adviser.
Fixed and Indexed annuities are considered insurance products, as you are “insured against the lost of principal”. A variable annuity where you could lose principal is consider an investment product. For these reasons, they are sold by different people.
When buying a new annuity, the prices of a specific annuity will not vary from one annuity sales person to another, as they do not have the flexibility to discount or offer special terms. As there are over 30 major insurance companies that offer annuity products however, the selection of annuities for sale will vary greatly from one insurance agent to another. A particular annuity sales person might offer annuities from 10 or 15 insurance companies, so it pays to talk to more than one annuity sales person to find out whats available.
An annuity can be a very simple product or a very complicated product. A complicated annuity may have many bells and whistles that sound great, however adding on benefits can increase the costs of the annuity, add on annual fees, or lower the potential return. Its important to focus on your overall goals when purchasing an annuity, and not to get distracted by unnecessary features. You can learn more about annuity fees here.
To get the best price when selling your annuity, you must shop around! There are many companies that buy annuities such as JG Wentworth, Peach Tree Financial, and Woodbridge Financial. We suggest you contact at least four companies to get the best price. (Be prepared for dealing with high pressure sales tactics). The good news is that you might (at least if you bought a fixed or indexed annuity, more than a couple years ago) be able to get more than the cash value of your annuity!!! Why is this? If the annuity guarantees a good rate of return – higher than is currently available in the market – the annuity buyer will value that guaranteed rate of return.
This lesson is part of our Free Guide to Investing in Annuities. You can find our other free guides here.
Want to learn how to generate more income from your portfolio so you can live better? Get our free guide to income investing here.