While there are a number of checkpoints for selecting the right annuity, the following are three key tips that can help to point you in the right direction:
#1: Select a reputable and financially strong insurance companyAn annuity is a long-term arrangement between you and the insurer. Before you settle on an annuity, check the life insurance company's financial rating to ensure that they'll be around for the long-haul. Similar to consumer credit bureaus, there are several insurance rating agencies such as A.M. Best, Moody's, Fitch Ratings, and Standard & Poor's that can provide you with an indication of an insurance company's financial stability. Note: Not all companies are rated by all the agencies, and they each have unique standards and rating methods. Be sure to review more than one agency's rating before making a decision.
#2: Check with your State Guaranty AssociationAll insurance companies licensed to sell life, health, or annuities in a state must be members of the state's guaranty association. This provides a safety net for the funds from your annuity — up to the state's maximum amount — in the event the insurer is unable to pay the benefits in full. However, it's a good idea to understand just how much of your annuity contract your state's fund would cover, including any dollar limits that may apply.
#3: Shop and compareWhen it comes to annuities, you have many options in which to choose from. The right annuity for you is the one that meets your personal and financial objectives. For example, are you looking for an annuity to provide you with a lifetime of retirement income, income for your survivors or heirs — or perhaps both? Do your homework before you decide on an annuity and consider consulting with a financial advisor who can help you find just the right annuity based on your needs. Finally, be sure that you understand what fees will be associated with your annuity selection.
Getting the help you need
These three tips are just a basic place to start. If you're feeling unsure about making an annuity selection on your own or if you need more information and personal guidance, speak with a qualified financial advisor or life insurance representative.
Sources used in the development of this article include: Insured Retirement Institute.