When evaluating the numerous death benefit annuity riders on the market, Annuity FYI looks for a) features of the rider itself; b) the quality of the core annuities to which the rider may be applied; and c) the company issuing the annuity.
Criteria we use in evaluating the rider are:
- High compounded guaranteed roll-up rate — we generally prefer to see a roll-up rate from 5-7%.
- High age cap — up to age 80 at a minimum.
- High cap amount, or no cap. We generally prefer caps of at least 3x premium, however cap amounts affect younger investors more so than older investors.
- Availability of an Enhanced Estate Benefit (typically an extra 25% – 40% of the account value, and in some cases the greater of the account value or the roll-up, paid to the beneficiaries upon death of the annuitant and/or the owner).
- Rider fees.
- Ability to reset your riders to the highest anniversary value when your actual account performance exceeds the guarantee.
- A plan that allows resets to advanced ages (we generally favor plans that will allow resets until age 85+).
Criteria we use in evaluating the core annuities are:
- Outstanding additional features and benefits, including but not limited to living income benefits and enhanced death and estate benefits.
- Competitive annuitization factors and actuarial tables during payout phase. This translates into a larger lifetime income stream if you annuitize, for up to two people (husband and wife).
- M&E and Admin fees — we generally favor annuities with MEA fees of 1.15% or less.
- Sub-accounts and asset allocation models with strong historical returns that we believe will have strong future performance.
- Turn-key asset allocation models to meet investor profiles ranging from conservative to aggressive, with active rebalancing.
- A large selection of fund sub-accounts and the ability to invest outside of a model.
- Length of surrender period — we generally favor annuities with surrender periods of 6 years or less.
- Plans with generous penalty-free withdrawal provisions that won’t violate the riders.
Criteria we use in evaluating the insurance company issuing the annuities and riders are:
- High safety ratings of the issuing company (although with variable annuities your assets are held separately from the insurance company’s general accounts, the features and benefits are based on the claims-paying ability of the issuing company and its re-insurers).
- Company management, customer service, and ease of account access.