Annuity FAQs
Q.
Does an Equity Indexed Annuity decrease in value because of ups and down
in the stock market?
A.
No. Regardless of market ups and downs you can
never lose money due to market fluctuation.
Q.
What is a surrender charge?
A.
A
"surrender charge" is
a type of sales charge you must
pay if you withdraw money from an annuity
during the "surrender period." Most annuities allow a 10%
free withdrawal each year without incurring a surrender charge.
Q.
Can I assign a beneficiary to my annuity policy?
A.
Yes.
Q.
Is the growth in an annuity taxable income in the year in which it’s
made?
A.
No. Annuities grow on a tax deferred basis which
means you don’t have to pay income tax on the growth until you begin withdrawals. Additionally, annuities are not subject to
long or short term capital gains.
Q.
Is there a 10% IRS penalty for annuity withdrawals prior to age 59½?
A.
Generally
speaking, yes. Consult with your tax
advisor for specifics, as the IRS allows certain hardship withdrawals.
Q.
What is a participation rate?
A. The participation
rate is the percentage of the increase in the index that will be
credited to an equity indexed annuity
account value. For example: if the participation rate is 80%
and the index earns 10% for the year, the annuity would be credited with an 8%
return.
Q. Do annuities avoid probate?
A. Generally speaking, yes. Since beneficiaries are named to annuity
contracts they may avoid probate.
Q. Can I exchange one annuity contract for
another without incurring a tax liability?
A. Generally speaking, yes. A 1035 exchange is a tax free exchange
between annuity contracts. Consult with
your tax advisor or financial professional.
Q. Can the beneficiary of an annuity or life
insurance policy be changed?
A. Yes, at the owner’s discretion.
Q. Why are ratings of an insurance company
important?
A. An insurance company’s rating is based on their
financial strength. Financial strength
is generally defined by the company’s claims paying ability, quality of
investment portfolio, and the ability of its management to ensure operations
are strong year after year.
Life Insurance FAQ’s
Q. What is the difference between
whole life insurance and term life insurance?
A.
Whole life
insurance is permanent and generally cannot be cancelled by the insurance
company. Term life is pure death benefit
for a predetermined period of time, which then becomes cancelable by the
insurance company.
Q.
Can I convert my term policy into whole life?
A.
Yes, if the
contract allows.
Q.
I have a life insurance policy; can I increase the face value of it?
A.
Most companies require a new application and new underwriting, mainly in
part because health conditions, ages, and premiums per thousand dollars of
insurance change. Refer to your policy
for specific details.
Q. Is life insurance a necessity?
A. If you have financial responsibilities that need
to be addressed upon your death, we would highly recommend that you look into
it.
Q. Is a medical exam necessary when applying for
life insurance?
A. Yes, most of the time.
Q. Can I reinstate a lapsed life insurance
policy?
A. Yes. However, each insurance company has
different rules and procedures for reinstatement. Evidence
of insurability may or may not be required.
Q. Can I still qualify for life insurance if I
have health complications?
A. Yes, each company has a medical and underwriting
staff that evaluates each application individually. It’s not uncommon for life insurance
companies to issue policies to applicants that have a history of heart disease,
certain forms of cancer, and other types of health conditions. Approval is always at the underwriter’s
discretion.
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