Uncovering The No Fee Variable Annuity

Insurers always are coming out with gimmicks that aren’t all they initially appear to be.

A good example is the new “no-fee” variable annuities. I’ve been among those who for years have said that the high expenses of variable annuities make them unattractive to those who won’t let the investment returns accumulate for at least 10-15 years. That’s why some insurers are promoting no-fee variable annuities.

No-fee, however, doesn’t really mean there are no fees, and you lose some benefits with these policies.

One selling point of traditional variable annuities is the death benefit that guarantees your beneficiary won’t receive less than you invested or some other specified amount. The no-fee annuity drops this benefit. In addition, the mutual funds in which the annuity is invested still charge their various fees. Finally, the distribution options when you want to take money out of the annuity are limited.

This is just another example that when dealing with insurance products, or any financial service, you have to look behind the initial pitch. Get down into the nitty gritty and understand the details, or put your money elsewhere.