The Law Planet Blog

Here's the deal. Equity Index Annuities look and smell like a security but for reasons that escape me they are regulated as fixed insurance. I have written about this before. An insurance agent, with no securities training, could sell a product whose performance is dependent upon the movements of the stock market. And that's the good part.

The bad part is that most buyers don't understand what they're buying and their agents are making it less than clear as to what they're selling. I have handled some of these cases. I have a sense of what's going on.

And while an equity index annuity touts its "value," the fact is that the value is usually paid out over a fixed term. It is not a surrender or liquidation value. In a recent article in Investment News, the general counsel of an EIA issuer actually used the same BS line that insurance salesman use when they don't understand the product. She said a variable annuity would have decreased in value over the last year while an EIA would still be worth the same amount.

Unless her company's EIAs are different than the others I've seen, that's a load of crap! It shows that the lack of understanding of this product goes to the highest level. If the client actually wants the full amount available in the EIA, he/she loses a big chunk to penalties and fees. I repeat, this is a roach motel for your money. Stay away. This is why the securities regulators are stepping in. Someone with some market savvy needs to examine this garbage.

That's the view from The Law Planet - Jupiter, Florida.