Frequently Asked Questions on Annuities

Simply stated, an annuity is a contract between an individual and an insurance company.

Annuities are issued by insurance companies.

Licensed insurance agents sell fixed annuities (immediate, traditional fixed and indexed annuities), a securities license is required to sell a variable annuity.

What is an immediate annuity?

An immediate annuity begins payments to the annuitant "immediately" usually starting 30 days after the premium is paid. They are called immediate because there is no accumulation or deferred phase of the annuity.

What is a deferred annuity?

A deferred annuity which could be a traditional fixed, fixed-indexed or variable annuity has an accumulation phase before beginning the payment phase sometime in the future.

What is a fixed annuity?

With a traditional fixed annuity the insurance company sets a declared interest rate and also has a guaranteed minimum interest rate spelled out in the contract and the principal is protected.

What is a fixed indexed annuity?

Indexed annuities are an evolution to the traditional fixed annuity. They have a minimum interest rate guarantee like the traditional fixed annuity and include the potential for higher excess interest rates over the long term through index linked (such as the S&P 500) interest crediting methods. Premiums are protected along with any interest credited in previous years. Insurers typically use a cap, participation rate or margin to limit the amount of excess interest related to the index that is credited.

What’s the difference between a fixed and variable annuity?

The fundamental difference between a fixed and a variable annuity is with who assumes the risk. With a fixed annuity the insurance company assumes the risk and there is a minimum guaranteed interest rate, with a variable annuity the owner of the annuity assumes the risk of the underlying investments. The owner of a variable annuity chooses from a selection of investments called sub-accounts and assumes the risk and fees associated with them.

How is an Indexed Annuity different from a traditional fixed annuity?

The difference is in how annual interest rates are credited. With a traditional fixed annuity there is a declared interest rate. With an indexed annuity there is an indexed linked (such as the S&P 500) crediting method. Based on the performance of the index the insurance company may credit interest to the annuity utilizing a cap, participation rate or margin to limit the amount of interest credited. They are similar in that they both have a guaranteed minimum interest rate.

What are the different types of annuities?

Immediate, where payments begin right away to the annuitant. Deferred which can be Traditional Fixed, Fixed-Indexed or Variable, these all have an accumulation period before payments begin. Fixed and Fixed-Indexed have minimum guaranteed interest rates and protection of principal. With Variable the owner of the contract assumes the risk of the underlying investments.

How do I decide which type of annuity is right for me?

Start by answering a few questions. Do you have investable assets that you can comfortably earmark for retirement? Do you want to create a reliable income stream for when you retire that lasts a lifetime? When do you want to begin receiving payments? What is your tolerance for risk? Speak with trusted professionals, your CPA, attorney and Insurance agent.

If I’m not located in Florida, can I still contact Crown Atlantic Insurance to purchase an annuity?

Yes, we've teamed with a national network of trained professional insurance agents around the country. We can set up a face-to-face consultation with a local agent that is versed on the annuities available in your state.

Does it cost anything to speak with a professional agent about annuities?

No. Other than the time invested in learning about what's available in your state and whether any of these annuity contracts are suited for you, there is no charge.

How do I find the best person to speak to about annuities?

We've done that work for you. The national network of professionals we have in place can guide you through the annuity selection process. Call us to find the local professional agent in your area.

What types of annuities does Crown Atlantic Insurance offer?

Fixed Annuities - including Immediate, Traditional Fixed and Fixed-Indexed Annuities.

What states is Crown Atlantic Insurance licensed to sell annuities in?

We are currently licensed in all 50 states and DC.

What insurance carriers does Crown Atlantic Insurance do business with?

It is our responsibility to thoroughly understand your goals and dreams, using our experience to help you realize them. In order to accomplish this we offer a wide range of products through more than a dozen insurance companies. We are continually reviewing carriers with a track record of success and the products they offer to add to that list.

How can I purchase an annuity today?

Call our toll free number. We can connect you with an insurance professional in your area.

If I already have an annuity, can I change it for a different one?

Yes. There is a section of the IRS code that addresses this type of transaction, it's called a 1035 exchange. If it makes sense to move to a new annuity an exchange can be done between the 2 insurance companies. A trained professional agent can help you navigate this process.

What is the best age for buying annuities?

While there isn't an exact age to buy an annuity, typically it is not recommended for a young person due to the 10% IRS penalty for withdrawals prior to age 59 1/2.

How long does the process take to buy an annuity?

Once the paperwork is completed the process takes just a few days, counting mail time you should have the contract back from the insurance company in 10-14 days, sometimes quicker. The exception is if there is a 1035 exchange involved, that can take a couple of weeks to process as the company that currently holds your premium may want to attempt conserving the business.

When do the income payments start from an annuity?

With an immediate annuity the choices are 30, 90, 180 or 365 days from the purchase date. With a deferred annuity (traditional fixed, fixed-indexed or variable) the owner has control of how long they want to defer and accumulate until payments begin.

Are the same annuities available in every state?

No. Most annuities are regulated by each individual insurance department. So products can vary widely from state to state. That is one reason why we recommend a face to face meeting with a local professional who is trained on the annuities available in your state.

Is the premium I place in my annuity protected?

Fixed Annuities have guaranteed minimum interest rates and protection of premium. These guarantees are backed by the financial strength of the insurance company issuing the contract. With Variable Annuities the owner of the annuity assumes the risk of the underlying investment so the premium is at risk.

Who should consider buying an annuity and why?

Anyone with an eye on retirement. Social Security only covers about 40% of the monthly income needed in your retirement years. The days of company funded pension retirement plans are fast becoming a thing of the past. In addition, people are living longer and this trend is projected to continue. Annuities should be consider as a way to create an income stream in retirement, an income stream guaranteed to last a lifetime no matter how long you live.

Do annuities have any tax benefits?

One attractive benefit of an annuity is that the money in the annuity accumulates tax-deferred. With many investments you send the taxes on gains into the IRS at the end of each year, not with an annuity as that money remains in the annuity and earns interest until it is taken out at a later date. So you don't pay taxes on the interest earned until you begin taking money out of the annuity.

What is the difference between “qualified” and “non-qualified” annuities?

Qualified means that the money has not yet been taxed, like money deducted from your paycheck before taxes. Non-qualified simply means that the money has been taxed or after tax dollars.

Are there penalties for early withdrawal?

Typically an annuity will have a penalty for withdrawals in the early years of the contract but most contracts also offer an annual 10% withdrawal feature without surrender charges.

Can I take money out of my annuity without paying a surrender charge?

Usually you can. Most annuities have surrender charges in the early years but allow for up to 10% annual withdrawals without surrender charges. Once the surrender period is over, part or all of the money can be taken without surrender penalties.

Should I cancel or replace my current annuity?

In order to answer this question a side by side comparison of the 2 annuities should be done. The comparison should include an analysis of all features including interest rates, interest crediting methods, surrender charges and available riders. Seek assistance from you CPA, attorney and insurance agent.

What happens to my annuity when I die?

When you complete the annuity application, you'll be required to name a beneficiary who will be the recipient of the money in the contract. The contract will spell out how the beneficiary can take the money out usually it can be taken in a lump sum or over time.

What are the advantages of an annuity?

A big advantage of annuities is that they allow you to put money aside and defer paying taxes with no contribution limit as there are with other retirement accounts. Your premium and interest compound year over year without a tax bill until you begin taking payments. Other advantages with Fixed Annuities include guaranteed minimum interest rates and protection of premium. You can also choose a lifetime payment option that guarantees you will receive payments for your lifetime no matter how long you live.

What if I change my mind after signing the application documents?

Annuities contain a "free look" period that allows you a certain amount of time to return the policy to the company for a refund. The free look language spelling out the amount of time should be clearly stated in the contract.

How do I take money out of an annuity?

There are several ways, if you are beyond the surrender period, you can take it all in a lump sum. If you are within the surrender period, most annuities allow you to take 10% a year before incurring surrender charges, review your contract for this feature. Keep in mind that if you withdraw money prior to age 59 1/2 that the IRS will impose a 10% penalty. You can annuitize the annuity which sets up an income stream that you can receive for life or a set number of years, you have control of that choice. And many annuities now have the option of adding a lifetime benefit income rider that doesn't require annuitization and can boost the amount of your monthly payments.

What is the surrender period?

Surrender charges place restrictions on taking money out of the annuity. Generally, most annuities allow you to withdraw 10% annually without a surrender penalty. Most annuities have surrender charges between 5-10 years but there are some that are longer than 10 so it important to read the contract. The worst time to withdraw more than the 10% penalty free amount is in the first year or two when the surrender fees are at their highest. After that, the surrender fee gradually phases out until it reaches zero.

How is an annuity different from a savings account?

An annuity is a contract with an insurance company. A savings account is set up with a bank. Money in an annuity is tax-deferred until you begin taking it out, any interest earned on a savings account is taxed annually. An annuity should be considered for money you are earmarking for retirement and to create an income stream for life. A savings account would be a better place to save for a car or a home.