Stop Senior Scams: Watch out for scams when purchasing an annuity
Source: Office of Pennsylvania Governor Josh Shapiro
Older adults should be wary of unfair business practices that can occur when purchasing an annuity, an insurance contract that exchanges a large payment amount for future, regular income payments. Annuities are often used to provide a steady stream of income in retirement.
“An annuity should always be a purchase made in the best interest of the buyer – not the agent,” said Pennsylvania Insurance Commissioner Michael Humphreys. “Older adults are often pressured into purchasing annuities they don’t fully understand. When consumers purchase an annuity that does not suit their needs, it can result in the loss of income and lack of access to their savings. We’re urging older adults to educate themselves on annuities and remind them to remain vigilant against aggressive or predatory agents.”
Inappropriate sales practices can occur when shopping for an annuity. The Pennsylvania Insurance Department (PID) encourages older adults to do the following when shopping for an annuity that is in their best interest.
- Read the material and ask questions.
- Understand that money put in an annuity typically is “locked” for a period of time specified in the annuity contract (usually five- to-10 years). Withdrawing some or all of the money early could result in a surrender charge.
- Pay attention to optional features offered with annuities, and get information about additional fees associated with adding benefits.
- Utilize the free look period. Read and understand the terms of the contract. If you decide the terms are not favorable, you can cancel the contract and receive all of your money back during the free look period.
Consumers should not:
- Feel pressured into buying an annuity after receiving a free lunch, dinner or gift. Consumers are not required or obligated to buy anything in these instances.
- Write the check out to the agent or producer. The check should be addressed to the company issuing the annuity.
- Accept verbal assurance. The policy terms should always be verified in writing.
- Work with an agent who is unwilling or unable to provide credentials.
The PID addresses inappropriate annuity sales practices. Pennsylvania law, Act 99 of 2021, requires agents to put the needs of clients first and to act in the client’s best interest when recommending an annuity.
Since 2023, PID has helped Pennsylvanians recover more than $2 million by assisting with free look period reviews and assuring proper payment of annuity proceeds. In one particularly egregious case, PID was able to get more than $130,000 returned to an older Pennsylvanian who was sold an annuity, without the presence of the consumer’s preferred financial advocate, that clearly wasn’t in the consumer’s best interest.
“Financial exploitation has become the number one type of reported abuse against older adults in Pennsylvania,” said Pennsylvania Secretary of Aging Jason Kavulich. “Because these cases take many forms and are often more complex, investigators are rarely able to get back all the money taken from the older adult, which is why education and prevention are so important. Older Pennsylvanians have worked hard and have been active in their communities all their lives. They should live with the dignity and respect that we all deserve, and we all must do what we can to ensure that an older adult’s assets do not fall into the wrong hands.”
Consumers who wish to file a complaint against a producer or agent selling annuities may visit PID’s website at insurance.pa.gov/consumers or contact PID’s Consumer Services Bureau at 1-877-881-6388.
Suspected elder abuse, including financial exploitation, can be anonymously reported 24/7. For Philadelphia residents, call the PCA Helpline at 215-765-9040. For other Pennsylvanians, call the statewide reporting helpline at 1-800-490-8505.
