If you're thinking about buying a variable annuity (it's a pretty good bet, because you're here) how do you know what company to buy from? You can't drive down the street to the big box annuity store and browse aisle 43. You can't even go on Amazon and find out what everyone else is buying.
Variable annuities are a complicated mix of insurance and investments. They can be more than just a bit confusing. Independent insurance agents are absolute experts when it comes to confusing puzzles like these, and their job is to simplify the process.
They’ll help guide you through all your options, weigh the good and the bad, and even see you through it all from start to signature. Simpler, isn’t it?
The Top 20 Variable Annuity Companies
We’ve put together a handy chart to show you the sales ranking, financial strength ratings, and J.D. power satisfaction ratings (where available) of the top 20 variable annuity companies.
Claims Paying Ability Tier
|Rank By Sales *||Company||A.M. Best||S&P||Moody's||Fitch||J.D. Power Satisfaction**|
|2||AXA US||Highest||Highest||Highest||Highest||Better Than Most|
|3||TIAA||Highest||Highest||Highest||Highest||Better than Most|
|7||Brighthouse Financial||Highest||Highest||Medium||Medium||The Rest|
|9||Riversource||Highest||Highest||Highest||N/A||Among The Best|
|13||N.Y. Life||HIghest||Highest||Highest||Highest||Among The Best|
|14||Thrivent Financial||Highest||N/A||N/A||Highest||Not Rated|
|15||Fidelity Investments Life||Highest||N/A||N/A||N/A||Not Rated|
|16||Northwestern Mutual||Highest||Highest||Highest||Highest||Not Rated|
|17||CMFG Life||Highest||Highest||Medium||N/A||Not Rated|
|18||Principal Financial||Highest||Highest||Medium||Highest||Not Rated|
|19||Great- west Financial||Highest||Highest||Highest||Highest||Not Rated|
*Source: LIMRA Secure Retirement Institute U.S. Individual Annuities Sales Survey 2nd Quarter 2019
**Source: JD Power 2019 U.S. Life Insurance Study
Who Sells Variable Annuities?
Variable annuities are retirement products that are a combination of insurance and investment features. The insurance features are guaranteed lifetime income, death benefits, and tax-deferred growth. Variable annuities offer a selection of investments called subaccount funds, which are similar to mutual funds.
Companies that sell variable annuities have to be licensed as insurance companies by the state where they are selling, and registered with the SEC as an investment company.
Out of the 773 life insurance and annuity companies in the US, 20 of them sell 95% of the variable annuities. That makes it a little easier to decide who to buy from.
What's the Difference between Variable Annuity Companies?
The main difference between variable annuity companies is who sells their product. Variable annuities are registered products which means that representatives have to be both insurance and securities licensed to sell them.
Career, wire house, and banks sell both their own products as well as outside products to clients.
Some career sales forces can only sell their proprietary product. Independent broker dealers only sell outside products. It’s important to know what type of representative you are talking to. Can they offer just the products of one company, or can they offer multiple products?
What Do You Want to Accomplish?
Before you decide what company you want to buy from, you should be clear about what you are trying to achieve with a variable annuity. What features are important to you? Are you looking for a low-cost product for tax deferral and portfolio management? If the company you are looking at doesn’t offer that product, the rest doesn’t matter.
Variable annuities are retirement products. They should fit into your retirement plan. If you haven’t done any retirement planning yet, that should be your first step. That said, here’s a quick review of variable annuity features:
- Tax-deferred growth: There is no tax on subaccount capital gains or dividends until there are distributions, and also no tax on transfers between subaccounts.
- Downside protection: Living benefits offer a guaranteed minimum lifetime income regardless of market performance. Variable indexed annuities can protect retirement money from market losses.
- Professional money management: Variable annuities offer a selection of diversified and professionally managed investments.
- Legacy planning: Variable annuities offer death benefit protection for beneficiaries. Some products offer enhanced minimum death benefits.
How Do I Know I’m Buying from a Quality Company?
One good thing to know is if other people are buying from this company. Are they a leader? While it doesn’t tell you about the company, it’s a good indication that financial professionals have some confidence in them.
It’s true that Mom says, “If your friend jumped off a bridge, would you do it too?” While that’s good advice, it doesn’t apply here.
How does the company treat its customers? One way to find out is J.D. Power's consumer satisfaction survey of annuity companies. They use a rating system of Among The Best, Better than Most, Average, and The Rest.
Variable Annuity Company Ratings
Variable annuities are long term investments. You are going to want to know that the insurance company will be around as long as you are. Financial rating agencies, A.M. Best, Moody’s, S&P, Fitch, and others analyze life insurance companies. They publish financial strength ratings which is their opinion of the company’s ability to pay policyholder obligations.
Each agency has its own methods, but the big picture is consistency. If all the agencies rate a company highly, it’s a good sign. While the rating agencies use different systems of measure, all of them break down into the categories of high, medium, and low ability to meet policy holder obligations.
What's So Great About an Independent Insurance Agent?
Variable annuities can be an important part of your retirement plan. While they have many features and benefits, they are not for everyone. Variable annuities are complex, and searching through options can be confusing, time-consuming and frustrating. An independent insurance agent's role is to simplify the process.
They will make sure you get the right features that meet your unique needs and will break down all the jargon so that you understand exactly what you're getting.
TrustedChoice.com Article | Reviewed by Neel Lane
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LIMRA Secure Retirement Institute U.S. Individual Annuities Sales Survey q2 2019
JD Power 2019 Life Insurance Study