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MAINE BUREAU OF INSURANCE
34 State House Station
Augusta, Maine 04333-0034

Tel. (207) 624-8475 Fax (207) 624-8599 TDD (207) 624-8563

Maine Bureau of Insurance Gives Tips to Consumers on Buying Annuities

September 13, 2005

Contact: Alessandro A. Iuppa, Superintendent
Tel: (207) 624-8401

Augusta, Maine: The Maine Bureau of Insurance advises consumers about the importance of understanding the different types of annuities available and how they work before investing their money.

Annuities are investment products sold by insurance companies and are intended to earn money over time for the purchaser. Different types of annuities have different degrees of financial risk so it is important to make an informed decision based on your financial situation.

Considered the least risky, “fixed rate” or “non-variable” annuities guarantee a minimum rate of interest on your premium. In Maine, that rate is usually between 1% and 3%, but can be higher. A common type of fixed rate annuity is the deferred annuity. The deferred annuity has an accumulation phase during which the money that you invest in the annuity (less administrative charges) increases and a future payout period when the company pays the accumulated value to the annuitant as income. The accumulation phase usually lasts several years and the amount of money that you can withdraw during this period is limited. Withdrawals over and above what is allowed usually result in significant withdrawal charges.

Variable annuities have a greater investment risk than fixed rate annuities. When choosing a variable annuity the owner selects separate company owned accounts for investment. These accounts may earn more for you than a “fixed rate” annuity. However, variable annuities may also lose money if the separate accounts don’t perform well. There is no guaranteed minimum rate of earnings to protect you, so the dollar value of the annuity may fall below the value of your premium payments. With variable annuities, don’t count on past performance as a measure of future performance.

Here are some things to keep in mind if you want to buy an annuity:

  • Shop around; check with different companies to find the best deal and an understandable policy.

  • Consider your age and financial situation when you buy a deferred annuity. The accumulation period may be longer than you want to wait before you can receive income from the annuity.

  • Take advantage of the “free look” period. When you receive the annuity contract, you have at least ten days to review it and request your money back if you find that the annuity isn’t what you want.

  • Either before or at the time the application is completed, the sales person must give you a buyer’s guide and a disclosure document that explains important information about the product in easy to understand language.

  • If you are confused or have questions about the policy, call the sales agent for answers or call the Bureau of Insurance for help. Our phone number in Maine is 1-800-300-5000. Although we can’t offer advice on what you should buy, we can give technical information and point out important issues for you to consider before you make a decision.

The Bureau of Insurance is part of the Department of Professional and Financial Regulation which encourages sound ethical business practices through high quality, impartial and efficient regulation of insurers, financial institutions, creditors, investment providers, and numerous professions and occupations for the purpose of protecting the citizens of Maine. Consumers can reach the Bureau through its web site at www.MaineInsuranceReg.org; by calling 800-300-5000 in state; or by writing to Bureau of Insurance, 34 State House Station, Augusta ME 04333

Last Updated: May 24, 2011