Most big ticket purchase come with a warranty or a **guarantee – including annuities. Did you know that all annuities come with a money back satisfaction **guarantee?
Eric and Dick examine one of the most unknown or misunderstood aspects of annuities available today’s market.
**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.
Definition of ‘Free Look Period’
A period where a new annuity owner is able to terminate their annuity contract without penalties or surrender charges. A free look period often lasts for 10 or more days (depending on state law and the insurer’s terms), allowing the contract holder to decide whether or not to keep it; if he or she is not satisfied, the contract purchaser can receive a full refund effectvely releasing them from the annuity contract to re-consider or choose other alternatives.
Investopedia explains ‘Free Look Period’
During the free look period, the purchaser can continue to ask the insurer questions regarding the contract in order to better understand the policy. If refunded, the amount given back may equate to the value of the account at cancellation or to the amount of purchase payments, depending on the state.
Annuity Guys® Video Transcript:
Dick: Eric, you know most people don’t realize they actually have a 100% money-back satisfaction **guarantee on an annuity.
Eric: That sounds awfully tempting. Now you have to explain does this last forever for as long as I own the annuity? Oh okay, so the 100% money-back…
Dick: No, there’s a catch. You have a window of opportunity.
Eric: Could this be the free look period?
Dick: This is the free look.
Eric: Okay, so now when you say free look, now we have to explain free look.
Dick: Well, the states each state has decided that this is too big of a decision to not have a time to look at your contract, your annuity contract. A time period where you can look at your annuity contract, you can reassess your decision, and have that time period they call that free look.
Eric: Okay, so I’ve decided I want to purchase an annuity. My friendly agent shows up at my door. Mr. Van Dyke here is your policy. Congratulations, you own an annuity. So is that when the clock starts ticking?
Dick: That is when the clock starts ticking, and folks what you’ll typically have is a delivery receipt that’s signed, and when that delivery receipt is signed from that point forward, you have this period of time that’s **guaranteed by every state. That time period will vary. Each state has its own limitations on that.
Eric: Minimums, the minimums are…
Dick: Ten days are the minimum.
Eric: I don’t think I’ve seen one less ten days.
Dick: Not less than 10, but some up to 30. I don’t believe they go beyond 30. Now a lot of states will have a say 10 day, but yet the company will give 30 days.
Eric: Right, so sometimes the company’s **guarantee is better than what the state minimum is, so that provision that allows us to review the policy at our discretion, we’ve taken ownership of it; it’s in our hands, we can then truly go through it; without any penalty or ramification other than I get my money back.
Dick: Correct, and the importance of this Eric, we’ve found in our own practice so many times people have hesitation from different viewpoints. Sometimes it’s a hesitation just to get started, because their afraid once they get started and they start moving down a road, they like something, they start to question if they should move forward.
But what we’ve really been able to help our clients with is understanding that they actually do have this 100% money-back **guarantee, so that they can actually move forward with confidence. That even at the point where they’ve made their decision, the money has transferred, the company has it, they now have their contract, we can still make changes.
Eric: Right, you can still undo.
Dick: It can be completely undone, right.
Eric: It’s the major undo button, and that’s what I think works to the consumer’s advantage.
Dick: Yes, it does.
Eric: So it’s an understanding that even once you’ve made the decision, you’ve got the policy in front of you, and that’s I think the key thing. You’ve actually got what the insurance company is going to present you with. All the details, the documentation those things should be explained within the documentation.
Eric: So as the agent goes over it with you, if for some reason there’s something you don’t like, you have that opportunity to still get out of that initial decision. Some people have buyer’s remorse, and we always talk about it. This is your return. Typically, you only get to do it once, so you should feel comfortable about all those decisions.
Dick: A good understanding about what you’re doing and know that your comfort level is pretty strong.
Eric: Right, and so if you’ve gone in. You’ve got the policy. You’ve asked the questions and for some reason you don’t feel good about the answers or whatever, you’ve got a period of time to either one, do some additional research, make some additional calls or to back out.
Dick: Eric, I do have to say that there are what, I guess I would call bad advisers or bad agents that don’t like this provision, because basically they’re closers. They want to go in and close an annuity and sell an annuity, and they’re not so concerned about what the clients getting. They’re more concerned about their own benefit.
But a good adviser, a credible, serious financial planner or retirement planner will actually take their time and they actually like the free look provision, because they want the client to be very comfortable, with whatever it is they are deciding.
Eric: For people like us that take pride in our practice, in what we do, we want to make sure you fully understand everything you have. Everything has pros and cons.
Dick: Right, there are tradeoffs in everything.
Eric: It’s all part of the understanding process. We’re not saying you can eliminate the cons by using a 100% money-back **guarantee in the free look provision. It’s just understanding what you own and that you’re comfortable, with all of the aspects of what you’ve purchased.
Dick: Right and when we even look at our own practice, we go back over the last seven years or so, how many free looks have we had? One; and that was just changing life circumstances that caused this person to have to rethink what they had decided, but it really can really help relieve some of the stress, from the client being able to make that decision, and at the same time make a good decision.
Dick: So is there really, when we really think about it, is this really a 100% money-back **guarantee?
Eric: It is, because you can undo. Now the big caveat there is the time frame. You have to do it within that provision. Knowing you have at least 10 days I think for every state, but understanding that’s that your time frame. You’ve got it. Look at it. That’s your time. Once those days are gone, so is that provision.
Dick: And there’s nothing wrong, folks with asking your adviser right up front, how long would I have to look at this, before I would actually have to pretty much, stay with my decision. And that doesn’t mean you are going to free look it. It just means that you really want to know what your rights are.
Eric: Right, you want to understand everything that’s there. I think we’ve covered it.
Dick: Yes, we have. Thank you for joining us today.
Eric: Have a great day.