Older adults could lose access to their savings due to unfair business practices associated with shopping for an annuity
Harrisburg, PA – Keeping consumer-protection a priority and in observance of Elder Abuse Awareness Month this June, the Shapiro Administration reminds older adults to be wary of unfair business practices that can occur when purchasing an annuity.
“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 a consumer purchases an annuity that does not suit their needs, it can result in the loss of income and lack of access to their savings. During Elder Abuse Awareness Month, we're urging older adults to educate themselves on annuities and remind them to remain vigilant against aggressive or predatory agents."
An annuity is a contract between a consumer and insurance company for the payment of money either at once or at some time in the future. These contracts are often used by people who are managing their retirement income.
Inappropriate sales practices can occur when shopping for an annuity. 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 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 (this only applies 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.
- Make their 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.
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 over $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 over $130,000 returned to an older Pennsylvanian that was sold an annuity that clearly wasn't in the consumer's best interest, and that was sold without the presence of the older Pennsylvanian's preferred financial advocate.
“Financial exploitation has become the number one type of reported abuse against older adults in Pennsylvania. 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," said Pennsylvania Department of Aging Secretary Jason Kavulich. “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."
Anyone suspecting elder abuse should call the statewide reporting helpline at 1-800-490-8505, which operates 24 hours a day, seven days a week.
Consumers who wish to file a complaint against a producer or agent selling annuities may visit PID's website or contact PID's Consumer Services Bureau at 1-877-881-6388.
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MEDIA CONTACT: Adrian Sipes, ra-in-press@pa.gov
Jack Eilber, agingcomms@pa.gov