Polvogt Insurance Group is seeing growing interest in indexed annuities in our Katy/west Houston area.  People are looking to keep their money safe and they are expecting more growth in the economy and want to take advantage of that growth.  Let’s go over reasons to consider indexed annuities along with a few details for getting the best value from these financial tools.

The short definition:  an indexed annuity is where you place your money in an arrangement where the interest it earns is paid out to you on a regular basis, and it is tied to an index, in this case a stock index.  You will never lose your principal, even if the stock market takes a major plunge.  The “floor” for the interest rate is zero percent.  If the market increases, your interest rate increases.  There is a cap, that your interest rate cannot go above.  And it is a longer-term agreement, not a short-term strategy.  Again, the safety similar to a CD only with a significant upside, depending on the stock market (S&P 500 for ours).

Should you buy one of these?  People buy them to help make sure they don’t “outlive their money.”

First off, what does it mean to “outlive your money?”   This refers to the possibility that during the last phases of a person’s life, the resources it takes to maintain a standard of living, or simply maintain life itself may dwindle and deplete down to nothing.  What happens then?   Not a good prospect.   We all want to savor the good times spent on this earth, and most of us want to be able to spread those good feelings, but that gets harder if a person’s health is failing and they can’t adequately take care of themselves.  And it gets harder when a person becomes financially dependent on other people in their life.

Discomfort, uncertainty, worry, poor health – people are looking for strategies to avoid all that in their later years, and insurance products like indexed annuities can help.  But these are complex financial tools.  Enter Polvogt Insurance Group.  Our brand is a simple phrase, we’ve had it for a long time and it captures what we believe in and what we offer our clients:  K.  A.  T.  I.  E.   stands for:  Kindred Advocates for Trusted  Insurance  Excellence.

Everybody has different needs and an indexed annuity may have a lot of options.  It was just a few years ago these products were developed and offered to the public.  The principle behind them is so logical and has so much potential that they suddenly came in all shapes and sizes.  A lot of people took advantage of them, and some people were taken advantage of.

Anyway the dust has settled.  The offerings are more mature now, some rules were made, and there are simpler ways of judging their value in your life.   More on this later, or give us a quick call and let’s talk about them! (281 395 9400).

This is a post about a seminar we gave yesterday, on Indexed Annuities.  I just watch my staff get better and better at explaining things and showing the value of financial products that we sell.  My job was to listen, and answer any questions that nobody else knew the answer. (There weren’t any!)

Indexed Annuities are a good way to hedge risks with your money.  You can’t use CD’s these days to hedge risk, because their interest rates are so low, it’s likely that inflation will surpass the interest rates and you end up losing money by choosing the safety of a CD.

The Indexed Annuity pays a return percentage that relates to a securities index, like the Dow Jones Average or the S&P 500.  It’s for longer-term investing, and it’s safe.  Your odds of losing money are quite low.   Here’s how it works in general.  The minimum return rate that the annuity pays will never go below zero percent.  That will never change – no matter what the stock market does.  As the index rises, so do your returns, up to a point.  That’s called a “Cap” and they reset the cap every year, meaning they adjust it up or down according to several factors.

But you never receive a negative rate of return even if the stock market has a percipitous fall.

It’s a great little protected income tool.  There are some details to be aware of, like how these are insured by the government, how to do an early withdrawal, how the taxes work, and where to buy these instruments.  But that’s what we’re here for, to answer your questions.  I think we’ll have another community information session real soon.

Till then, we will do some more posts on this very valuable topic.

Comments?

At Polvogt Insurance Group in Katy we are always surprised at how many of these points are not routinely covered or understood by people that are getting into an insurance relationship.  Please take a look, especially if you are at that point.  It may mean a little more work for you on the front end, but the best things happen when you are paying money for what you actually need or want.  You don’t want these things to remain unknown until they are acutely needed.

1. Is the policy an “All Risk” policy or a “Named Peril” policy?  (Named Peril policies list of causes of damages and excludes all other perils; “All Risk” policies cover all causes of damage except what’s specifically excluded.)
2. What is covered?  Your policy will only cover what you own.  Does it cover your home and personal property?  Does it cover your garage or other out buildings?  Does it cover landscaping and trees.
3. Is a flood policy included in the proposal?
4. Does the policy pay you “cash value” for your losses or is it a “Replacement Cost” policy?
5. What is my level of liability?  Do I have enough for my pool?  What is the difference in premium between $100,000 or $300,000 or $500,000 of liability?  How much do I actually need?
6. How does the deductable work?  Is there more than one different deductable?  Ask, “IF I had a fire today, how much in dollars would the deductable be?  What about a windstorm?  And what the dollar amount of the deductable if I had damage from a “Named” windstorm?”
7. How do deductibles apply to special personal property?  Jewelry, tools, electronics, heirloom, glass windows, etc.)
8. What endorsements are included and how do those endorsements work?
9. Will I have a consistent representative of the company to work with or will I get whoever answers the phone?  Will they know me and/or my situation?  How often will I have to work with overseas phone assistance? 
10. Are there any additional fees for putting the policy in place?  Are all fees disclosed before I sign?

How do I compare a new policy to my current policy?