Purchasing a plane ticket has become as easy as doing an internet search. Finding the best annuity for your specific financial needs should be just as easy.
Websites like Orbitz, Priceline, Expedia, Kayak, HotWire and Travelocity have made buying a plane ticket fast and easy. Plane tickets are commodities. So are annuities.
Less than 5% of all annuities are purchased through direct portals. That percentage should grow, however, as people discover that annuities can be purchased online without the need to meet with a sales agent. I'm proud to say that I co-founded the first direct-to-consumer annuity website to provide that nonagent option to the consumer. I'm sure that many others will follow my lead, and that is nothing but good news to the annuity consumer.
Plan Your Contractual Trip
When shopping for a plane ticket, you know exactly where you want the flight to go. The same destination detail should apply when buying an annuity. I always tell my clients that there are only two questions they need to answer when buying an annuity:
- What do you want your money to contractually do?
- When do you want those contractual guarantees to happen?
Do you want guaranteed income right now, or do you want it to start at a later date? Is principal protection or legacy the goal? Remember that annuities are not investments. They are contracts between you and the issuing carrier, so base your decision on the contractual guarantees spelled out within the policy.
Shop for the Best Price
There's no frequent flier or frequent buyer programs when it comes to annuities. Most people don't care about the airline when buying a plane ticket, because the goal is to find the best price. The same strategy should apply to buying annuities. As I always say, "Fall in love with the contractual number, not the company name." In other words, shop for the best contractually guaranteed number and then look at the ratings and COMDEX score of the carrier to make your final decision.
First Class or Coach?
Flying first class always costs more, but some people would not travel any other way. Buying annuities from a first-class perspective revolves around the ratings, claims paying ability, and COMDEX score of the issuing carrier. Always remember that the contractual guarantees are only as good as the annuity carrier backing them up. Even though there are specific State Guaranty Funds to insure annuity purchases to a specific amount, your decision should be primarily based on the company.
It's common sense that the annuity carriers that have the highest rating or COMDEX score don't always offer the highest contractual guarantee. It's important to shop all carriers so you can make an informed decision on both the contractual number and the carrier offering that guarantee. There's no perfect answer to how you should buy an annuity or choose a company, because it all comes down to your comfort level with the carrier.
'Free Look' Your Annuity Ticket
Some airlines offer your money back if your travel plans happen to change. All annuity carriers offer a "free look" provision for every annuity sold that allows you to receive a full refund without question. Once the policy is delivered, you have a specific period of time (depending on your state rules) to get your money back. You don't even have to provide a reason why. Just call the issuing carrier, and a check will be in the mail to you immediately.
Annuities are the only financial product with this money back provision, and this is a fantastic proconsumer rule that the industry is proud to stand behind. If there is one thing the annuity industry has done right, it's the free look rule.
There is No Best Annuity or Plane Ticket
If an agent or adviser tells you he has "the best" annuity for you, that probably means it's the best annuity for him. Most likely, selling enough of that preferred annuity choice will earn him a higher commission or some incentive trip to an exotic destination. Once again, annuities are commodities. If an adviser is not shopping for your annuity like you shop for a plane ticket, then you need to find another source for your annuity purchase -- or do it yourself.
This article is commentary by an independent contributor. Stan The Annuity Man is the top independent annuity agent in the country, licensed in all 50 states, and a co-founder of Annuities.direct, the first direct to consumer annuity shopping platform.
Stan The Annuity Man has published six best-selling books on annuities, and will send them as a gift to all TheStreet readers under no cost or obligation. Simply email Stan (email@example.com) your physical mailing address or click to fill out the online form.