Ah, annuities. For many, you either love or hate them, and there’s rarely an in-between. And it makes sense why—annuities are a tricky concept for many, and without proper knowledge of what they are and how they work, it’s easy for your clients to gather some misconceptions about them. That’s why it’s even more critical to address those misunderstandings with them and discuss what an annuity would entail.
This article will cover some of the most common misconceptions about annuities that you can address with your clients. Let’s start with the widespread misunderstanding that all annuities are just variable annuities.
This is a widespread belief because variable annuities are perhaps the most common type available. But you know that it doesn’t stop with variable annuities and that different plans can be offered. Now, it’s time to make sure that your clients know, too. As you know, general types of annuities include deferred and immediate. The difference between the two lies within their names: a deferred annuity means the funds within it build over time and are given to the client at a later time, while an immediate annuity means the funds begin to be paid out as soon as possible. And within those realms are other plans, like fixed-rate, where you can have them deferred or immediate. It’s important to discuss all types of annuities available with your clients or leads so that they can select the best one for them.
Your clients work hard to build their retirement funds through their IRAs and 401(k)s, so they should continue to help themselves with an annuity plan if it fits them well. And that’s for the simple reason of how it offers them income for life. It’s important to remind your clients that situations change and that those who initially warded off annuities can run into situations that make them much more appealing, like if long-term care protection suddenly becomes a top priority. The bottom line is that it may not be for everyone, and that’s fair. However, many annuity plans have many advantages, like guaranteed returns and predictable payouts, which help many people.
This is a common misconception that many Americans have when it comes to annuities. They believe their insurance companies will receive the money from annuities, not them. Although clients don’t come out with 100% of the benefits to be gained, it’s important to remind them that they aren’t the ones being hit with a loss, as the insurance company would.
You may understand what this means, but there’s a strong chance that your clients won’t, so you must help them understand. Interest rates on annuities fluctuate whenever a recession strengthens or eases, as they would for any other loan. And unless your clients are interested in fixed-rate annuities, their rates will be impacted when there’s a rate change. If your client has invested $50,000 into the market, which suddenly drops by 50%, that leaves him or her with only $25,000. And if the market returns by 50%, then he or she will only receive half of that $25,000 back. To receive the total amount lost, the market would have to increase by 100%, and that’s an uncommon circumstance.
People do this because they want to transfer those funds to a more appealing investment. But if your insurance agency offers annuity plans that allow clients to see continued value in their plan during an increase in interest rates, then you may want to offer that so that you don’t suffer a loss.
Like any other investment, your clients must choose what they want their annuities to do for them. Do they want them to come in handy during retirement, or is it an investment they would like to benefit from earlier? In other words, do they want deferred annuities or immediate annuities? Understanding their intentions with annuities will allow you to explain the different available types that fit their needs, which means that they get to choose the right annuity for them at the best price.
A major misconception about annuities is the belief that the bank will receive the money back once you pass away. However, that’s not necessarily the case. Your beneficiaries can receive payments from your annuity plan after the event of your death. However, when explaining this to your clients, this is a perfect time for you to urge them to choose their annuity plan carefully. This is because their plan will determine how the annuities are disbursed. For example, deferred and income annuities are grand plans to give back to your beneficiaries. Make sure that you explain each plan’s advantages and disadvantages while discussing this misconception because this is one that most of your clients will care deeply about.
If annuities are losing their popularity, then this is news to us. It’s hard to imagine annuities becoming less used or referred to because they revolve around an extremely topical subject: money. Many people use immediate annuities because they allow them to generate a predictable income. Many others use different types of annuities because they operate as some sort of income. It’s a complete misconception to believe that they are unpopular.
There will always be misconceptions and misunderstandings about annuities, no matter how hard we try to set the record straight. But that doesn’t mean your clients should continue thinking that way. Addressing these misconceptions with your clients is essential for two reasons. The first reason is that their preconceived notions are holding them back from investing in something that could be great for them.
The second reason is that the rumors will continue if you don’t say anything. Yes, it’s impossible to reach everyone with this, which makes it a challenging task, primarily when celebrities like Dave Ramsey advocate against them. But that doesn’t mean you should do nothing about it. Educating your clients about the truth of annuities will lead them to share what they’ve learned with others, which will cause a chain reaction. Even if you change just a handful of people’s minds, it’s still worth doing. It just takes a little bit of effort to help them find what the best annuities are for them.
Visit the Lead Concepts blog page for more tips and tricks on annuities and other insurance-related topics. Lead Concepts is a lead generation company specializing in direct mail leads for those in the insurance industry, where our priority is listening to your specific needs and developing a program to fill your sales funnel with real prospects.
If you’d like to speak with one of our world-class lead experts, visit our website or call 800-283-0187 today.
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