Before buying a deferred annuity, you should ask about the interest rate, charges, access to your money, death benefits, and payout options. You should also make sure you understand whether the annuity fits your goals, time horizon, and need for retirement income.
The NAIC Buyer’s Guide says it is important to understand how annuities differ so you can choose the type that best fits your needs. It also says to be satisfied with the answers before you buy. A deferred annuity is generally a long-term purchase, so you should ask how long you may need to keep your money in the contract and whether you will need income payments later.
Important contract questions include whether the annuity is a single premium or multiple premium contract, whether it is an equity-indexed annuity, what the initial interest rate is, and how long that rate is guaranteed. You should also ask whether the initial rate includes a bonus rate, what the guaranteed minimum interest rate is, and what renewal rate the company is crediting on similar contracts.
You should also ask about charges and liquidity. The NAIC guide suggests asking whether there are withdrawal or surrender charges or penalties if you want to end the contract early and take out all of your money, how much those charges are, and whether you can get a partial withdrawal without paying charges or losing interest. It also says to ask whether withdrawal charges are waived for situations such as death, confinement in a nursing home, or terminal illness, and whether the annuity has a market value adjustment provision.
Other useful questions include what other charges may be deducted from your premium or contract value, whether choosing a shorter or longer payout period or surrendering the annuity changes the accumulated value or the way interest is credited, whether there is a death benefit and how it is set, and what income payment options are available. The NAIC guide also says to ask whether, once you choose a payment option, you can change it.
The 2022 NAIC guide adds broader suitability questions. It suggests asking whether you understand the risks of the annuity, how the annuity helps meet your overall financial objectives and time horizons, what features and benefits other than tax deferral make it appropriate for you, whether there is a guaranteed minimum interest rate, whether you understand any riders, and whether there are limits on how much you can take out each year without paying a surrender charge. It also suggests asking how to make sure your chosen beneficiaries will receive any payment from the annuity if you die.
Finally, when you receive the annuity contract, read it carefully and make sure it matches your understanding. Ask the agent or company to explain anything you do not understand before any free look period ends.
Receive your free NAIC Buyer’s Guide to Fixed Deferred Annuities at
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youtube.com/@AnnuitiesExplained. Contact Jeffrey Scott McLeod, LUTC for personalized guidance tailored to your state.
Educational content provided by Jeffrey Scott McLeod, LUTC, National Insurance Producer License #558629. This is for informational purposes only and is not a recommendation to buy or sell any annuity. Guarantees are subject to the claims-paying ability of the issuing insurance company. Always consult your own advisor and read the full NAIC Buyer’s Guide. For residents of your state.
Source: © 2025 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.
Annuities Explained is not affiliated with or endorsed by the National Association of Insurance Commissioners (NAIC).
