SPIA contract

[smjsl]

Hi folks, have you ever had a professional review an SPIA contract? I was told I'd have 7 days after SPIA purchase to review the contract and back out and I wonder if I need to line up someone for that period of time. Apparently I can't get a sample contract prior to purchase.

[REWahoo]

Quote:

Originally Posted by smjsl Apparently I can't get a sample contract prior to purchase.

That would ring some serious alarm bells for me.

Also, what sort of professional would you seek out to review the contract?

[Independent]

All insurance contracts have to be reviewed and approved by your state insurance dept before they are issued. So they meet some minimum standards.

A plain vanilla fixed SPIA should be very simple. You pay a single premium, they send you a monthly check. I'd expect that you could read through it yourself.

Some insurance plans are very complex (e.g. equity-indexed deferred annuities, or variable annuities with guaranteed benefit riders). Conventional wisdom on this site is to avoid those plans.

I'd expect a good agent to work with you on getting a sample contract. If nothing else, the agent could copy one that he/she delivered and black out the personal information.

I found a sample form by going to the state of Washington insurance dept https://fortress.wa.gov/oic/onlinefilingsearch/ filing search page.

I specified "A051 Individual Annuities - Immediate Non-Variable" and
"New York Life Insurance and Annuity Corporation"

I got one form filing for an SPIA. The actual form starts on the 7th page of the filing documents and is 7 pages long.

You could review that to get an idea of what an SPIA contract looks like.

[brewer12345]

Quote:

Originally Posted by REWahoo That would ring some serious alarm bells for me. Also, what sort of professional would you seek out to review the contract?

Out there on the interwebs there are some independent actuaries you can hire to review almost any insurance for a fee. Why you would need to do that for a SPIA is an exercise left for the reader.

[zinger1457]

I purchased a SPIA few years ago, the application was longer than the policy document. I had 10 days to review and cancel the policy if desired (30 days if 65 or older). The policy document was only 5 pages long and fairly straight forward to read/understand so I wouldn't think a lawyer or expert would be needed to review it. Since most agents deal with multiple insurance companies do some research beforehand on the insurance company you'll be contracting with, check and compare ratings (A.M Best, S&P, etc.)

[pb4uski]

There is no reason that you should not be able to get a copy of the contract without terms prior to purchasing, but it is a bit unnecessary as most jurisdictions have a 10-day "free-look" period.

[smjsl]

Thank you for the replies, folks.

I am interested in CPI-U adjusted SPIA and want to make sure there are no caps on CPI-U increases or what happens if the index goes away.

I plan to buy directly from a company or via Vanguard / Fidelity, and when I had asked Vanguard, they said I would only get the contract after signing up.

Perhaps, it's sufficient that I review it myself but wanted to see if you would recommend someone else to do so.


P.S. Currently, I only know of AIG, Principal Financial, and CMFG Life offering these products to folks under 50, so my choice is slim as to which ones to choose.

[Independent]

Quote:

Originally Posted by smjsl Thank you for the replies, folks. I am interested in CPI-U adjusted SPIA and want to make sure there are no caps on CPI-U increases or what happens if the index goes away. I plan to buy directly from a company or via Vanguard / Fidelity, and when I had asked Vanguard, they said I would only get the contract after signing up. Perhaps, it's sufficient that I review it myself but wanted to see if you would recommend someone else to do so. P.S. Currently, I only know of AIG, Principal Financial, and CMFG Life offering these products to folks under 50, so my choice is slim as to which ones to choose.

The language in the CMFG contract regarding the adjustment is:

Quote:

The adjustment for inflation is based on the percentage increase in the average Consumer Price Index (defined below) for the end of July, August and September of the prior calendar year, to the same average for the year prior to that. If the percentage change in the Consumer Price Index is zero or less, your income payments for the upcoming calendar year will remain unchanged. Income payments will never decrease due to an adjustment for inflation under these options. Consumer Price Index means the Consumer Price Index – for All Urban Consumers (CPI-U). If the Consumer Price Index is discontinued, a substitute index published by the U.S. Department of Labor or successor agency will be used. Such substitute index may be subject to approval by your state insurance department, if required by state law

.

There is no mention of any cap.

I got that language from page 80 of this WI form filing https://www.google.com/url?sa=t&rct=...21070826,d.eWE

[Big_Hitter]

Quote:

Originally Posted by Independent There is no mention of any cap.

it has a 0% floor though - gotta like that

[zinger1457]

It's been a few years since I looked into SPIA's with inflation protection but from what I recall most if not all of the ones I checked did have a cap. The inflation protection annuity offered by MetLife through the Feds TSP plan is capped at 3%/year. And although your monthly payments can't decrease if there is a year with negative inflation the next increase will be reduced by that amount. Another option to consider is a SPIA that increases by a fixed amount (2-3%) each year.

[MBSC]

For AIG (American General/American Pathway), this brochure says no cap on CPI-U increase.

Quote:

Consumer Price Index-U: This option provides an annual cost-of-living (inflation) adjustment to your income payment. Your income payments are adjusted annually and can increase or decrease along with the non-seasonally adjusted Consumer Price Index (CPI-U) published by the U.S. Bureau of Labor Statistics. On the upside, there is no cap on the increase percentage. On the downside, rest assured you will never receive less than your initial income payment.

https://www.immediateannuities.com/a...te-annuity.pdf

The following is contained in the AIG rate quote.

Quote:

This quote contains a non-seasonally adjusted Consumer Price Index-U (All Urban Consumers Index, ["CPI"]) feature. Each year on January 1st the benefit payment will be adjusted for changes in the CPI as published by the Bureau of Labor Statistics. The adjustment can raise or lower the benefit payment for the next year, depending upon changes in the CPI. A CPI decrease will never reduce the payment below the initial benefit payment amount shown on this quote. By guaranteeing a minimum benefit payment, any negative movements in the CPI which are not applied to the benefit payment will be used to offset future CPI increases by not changing the benefit payment until the year in which the cumulative annual increases exceed the cumulative negative adjustment. In the year the cumulative increases in the CPI exceed the cumulative negative adjustment, the benefit payment will be increased only to the extent the CPI exceeds the cumulative negative adjustment.

The clause for CPI-U being discontinued is similar to CMFG in my state.

[zinger1457]

One of the wrinkles I see in the AIG inflation adjusted SPIA is that the monthly income can be reduced based on the CPI-U, just not below your initial payment. I also see that AIG offers a one time cash withdrawal on their SPIA, up to 100% of the present value. Don't recall ever seeing that offered in a SPIA before. All these options definitely make reading the policy document details more critical.

[smjsl]

Thanks again, folks. Interesting finds. CMFG life does not give as good of a price but looks like it's better in terms of covering deflation.

Quote:

Originally Posted by Independent I got that language from page 80 of this WI form filing https://www.google.com/url?sa=t&rct=...21070826,d.eWE

The link above did not get me to WI form. Could you let me know how you found it?

[Independent]

Quote:

Originally Posted by smjsl Thanks again, folks. Interesting finds. CMFG life does not give as good of a price but looks like it's better in terms of covering deflation. The link above did not get me to WI form. Could you let me know how you found it?

It didn't work for me either, today.

I Googled: Wisconsin Insurance Filing Search
That got me to this page: https://ociaccess.oci.wi.gov/filing-search/webSearch

I selected:
Life and Annuity
Individual Annuity
CMFG Life Insurance Company
and checked: Policy Form

That got me this page: https://ociaccess.oci.wi.gov/filing-...filingTypes=on

I tried a few, but Tracking Number 199118 filed on 8/2/2012 seemed to be good.

The filing is 102 pages long. But, the form starts on page 76.

There seems to be some duplication. It looks like this is an amended filing because they changed "Participating" to "Non-Participating".