Introduction
Variable retirement insurance is one form of retirement insurance that provides a sustainable income for individuals after retirement. However, understanding how this type of insurance works can be complex. Therefore, individuals considering purchasing variable retirement insurance should ask some important questions to ensure they fully understand the product and that it fits their financial and investment needs. In this article, we will review eight questions that should be asked about variable retirement insurance.
1. Are there cancellation fees for variable retirement insurance?
Variable retirement insurances often impose fees known as cancellation fees, which the individual incurs if they cancel the contract before a specified period ends. An individual should not cancel a variable retirement insurance contract if they have to pay a cancellation fee unless the internal fees on the variable retirement insurance are higher than the remaining cancellation fees. If you have variable retirement insurance that imposes a cancellation fee, inquire about when the cancellation fee expires.
2. What are the death and expense fees on variable retirement insurance?
All variable retirement insurances impose fees for death and expenses. These fees help protect the insurance company from costs associated with death risks primarily. These fees typically amount to about 1.25%.
3. Are there additional administrative fees? If so, how much are they?
Some variable retirement insurances impose administrative fees in addition to the death and expense fees. These fees can range from 0.15% to 0.35% annually.
4. Does the variable retirement insurance include any optional riders?
There may be optional riders that have been added to the variable retirement insurance policy at the time of purchase. These riders may include death benefit riders, which provide guarantees about the amount that will be paid to beneficiaries in the event of your death, or living benefit riders, which provide guarantees about the amount you can receive as income from the insurance later.
5. How does each rider work, and what is the cost?
Optional riders have costs that can range from about 0.20% to 2.50% annually. Riders can be complex, so ask a customer service representative to explain them to you in a way you can understand. Ask if the rider applies while you are alive or only in the event of your death. If it is a living benefit, inquire about the conditions that must be met to benefit from this rider. If you do not understand the answers you receive, ask for clarification again. It’s your money. If you are paying for an additional rider, you have the right to know what kind of benefit you are paying for.
6. Can the rider be canceled?
Sometimes additional riders can be canceled, reducing the fees within the variable retirement insurance. If you decide that the rider does not provide valuable benefits, inquire if you can cancel the rider.
7. What are the average internal expenses in the sub-accounts?
Within variable retirement insurance, investment fund options are referred to as sub-accounts. Each sub-account will have management fees or internal expenses. These expenses can range from 0.45% to 2.00% annually, depending on the sub-account. Any cost associated with managing the money should be taken into account whenever you invest, as these fees can deprive you of the income you desperately need.
8. What is the current death benefit value on the variable retirement insurance?
If investments decrease in value, the death benefit value on the variable retirement insurance may be higher than the current investment value. This means that if something happens to you, the beneficiary will benefit from the higher value. If this is the case, think twice before canceling your insurance.
Once
Asking questions about variable annuities, you may want to consider replacing variable annuities with alternative investments that have lower costs. Some financial advisors suggest leaving insurance to insurance companies and investing in investment firms instead. They assert that insurance products of any kind are often more expensive than traditional investments. Speak with a financial advisor who can show you the value of annuities alongside other types of investments.
Source: https://www.thebalancemoney.com/questions-to-ask-about-annuity-2389039
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