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Old 12-15-2010, 05:15 PM   #81
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I think there are two catches:

- the unnecessary complexity that relatively few of the buyers of these things can see through

- carrier risk

Simple as that.
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Old 12-15-2010, 05:29 PM   #82
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National Underwriter' Annuity Handbook lists:

The following advantage of an EIA.

  1. Potential partial participation in an index with a minimum guaranteed interest rate.

Disadvantages of an EIA.
  1. Complexity - complicated design, not easy to understand
  2. Can't compare them... each companies' products are different (easier to compare something like a SPIA)
  3. Costly Surrender fees
  4. The money is not in a separate account... it is an obligation of the general account.

The focus of the book was on the product.... there could be company risk.
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Old 12-15-2010, 05:49 PM   #83
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The main thing I get form this thread is that for the right man or woman, selling insurance might be a pretty good gig.

Always best to sell something that only 1/100 of customers can understand, where the documents are written in absolute "terms of art", and where alternate sources of the product may be even worse than you are.

And generally, the buyer is going to be in trouble, but likely he won't figure it out until you are way down the road.

Ha
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Old 12-15-2010, 05:54 PM   #84
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And remember to jazz up the slick brochure with nice graphics of bald eagles and the American flag to project the image of strength and security...
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Old 12-15-2010, 06:00 PM   #85
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Quote:
Originally Posted by haha View Post
The main thing I get form this thread is that for the right man or woman, selling insurance might be a pretty good gig.

Always best to sell something that only 1/100 of customers can understand, where the documents are written in absolute "terms of art", and where alternate sources of the product may be even worse than you are.

And generally, the buyer is going to be in trouble, but likely he won't figure it out until you are way down the road.

Ha
If you are going to sell your soul, make sure you get a good price. I think I would rather work for the dodgier end of Wall St. Or maybe as a life settlements broker.

Sometimes I wish individuals had to carry these contracts with a CVA. What is a CVA you ask? If you are a big bank or broker and you bought an in the money guarantee from someone, you have to discount the value of the guarantee based on the creditworthiness (or lack thereof) of the guarantor. So a guarantee from, say, a AAA rated mutual would have very little discount while one from American Equity would have a large discount. Removes some of the temptation to take the fat terms from a shaky counterparty.
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Old 12-17-2010, 05:45 AM   #86
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Quote:
Originally Posted by haha View Post
The main thing I get form this thread is that for the right man or woman, selling insurance might be a pretty good gig.

...

Ha

A big life insurance industry problem is the way the job/compensation is structured:

  • Sell and get a large commission
  • Don't make your numbers... you make no money and are fired.

That is a disaster that has been going since the industry began.

Plus the products are complex because they involve mitigating risk and complex financial situations... often they are sold as tax shelters which further complicates the issues.

The two common pitfalls that happen too often:

  1. The agent willfully sells a product that is a poor fit for the person's needs (not suitable) or does it because they do not understand it themselves.
  2. The buyer misunderstands the product... often by not spending the time and effort to understand it.

The insurance industry has long abused the tax shelter status of their products. It is often the lure dangled in front of someone that entices someone to buy.
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Old 12-17-2010, 08:42 AM   #87
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Tjay...you said....Iím not saying that Iím thrilled with the financial stability of American Equity, they just happen to be the ones offering the best deal.

And as as dgoldenz said there is a reason for this. They need the money which speaks to their financial stability. There have been many annuity companies that have gone belly up. O.K. - not anything you haven't heard here.

There is one application which I believe a Variable or Fixed Income annuity ban be used with great success. It doesn't involve payouts.

I came to believe the right annuity can be "a great transfer of wealth vehicle" for certain circumstances....particularly when purchased during volatile market conditions....which is what I did inside my mothers trust. Th situation was this: I needed to grow the cash in her trust to help pay the trusts proportionate share of estate taxes when my Dad passed. I knew any increase in the annuity was catagorized as "growth"...and not "income" which meant I didn't have to pay it out to my Dad (annuitant) on a yearly basis from the marital trust. (he had other financial resources so not a problem). I also had other beneficiaries I had to protect. When my Dad passed away, the account was up 21% over less than a 2 to 3 year period of time. In this type of situation, an annuity can be a good vehicle with a death benefit guarantee....when one knows they will not be taking payouts.
But this is about the only application I can think of where an annuity is useful. It is an important one.

One question I always asked the agent is: "Why can't I just annuitize myself?" given my resources. Gets them every time. Their answer usually is "you can".

I honestly can not think of any reason anyone with some resources would buy an annuity...other than to not have to think about that portion of their money.

Best of luck to you....



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