Scam alert: Be careful when purchasing an annuity

Harrisburg, Pa. — Annuities are often used by people who are managing their retirement income, and unfortunately they're also subject to unfair business practices.

In observance of Elder Abuse Awareness Month, the Pennsylvania Insurance Commissioner has issued a warning to older adults to be wary 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.”

When shopping for an annuity, always:

Read the terms of the contract and ask questions about anything that is unclearUnderstand that money put in an annuity is typically "locked" for a period of time specified in the contract (usually 5-10 years); withdrawing some or all of the money could be penalized with a surrender chargePay attention to optional features that are offered with an annuityClarify what additional fees are associated with adding benefitsUtilize the free look period by reading and understanding the terms of the contract; if the terms are not favorable, cancel the contract to receive a refund. This only applies during the free look period.

Do not:

Get pressured into buying an annuity because a seller offered a free meal or giftMake a check out to an agent or producer; any checks should be made to the company issuing the annuityAccept verbal assurance. All policy terms should be verified in writingWork with an agent who is unable or unwilling to show their credentials

The Pennsylvania Insurance Department (PID) is in charge of addressing 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 last year, PID has helped Pennsylvanians recover over $2 million by helping with free look period reviews and assuring appropriate payment of annuity proceeds.

In one extreme case, PID was able reimburse over $130,000 to an older Pennsylvanian who was sold a questionable annuity without the presence of the client'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 24/7.

To file a complaint against a suspicious producer or agent selling annuities, visit PID’s website or contact PID's Consumer Services Bureau at 1-877-881-6388.