Filed Under:Annuities, Suitability

Regulators warn on unsuitable annuity sales to senior vets

The World War II Memorial in Washington, D.C. AP Photo/Lawrence Jackson
The World War II Memorial in Washington, D.C. AP Photo/Lawrence Jackson

The National Association of Insurance Commissioners (NAIC) recently issued a consumer alert on the unsuitable sale of deferred annuities to military veterans applying for VA benefits. The NAIC based its warning on a May report from the GAO that researched unsavory practices associated with helping veterans obtain payments from the Department of Veteran’s Affairs pension program.

Eligible vets must be age 65 or older and have a disability unrelated to their military service. Surviving spouses and dependent children also qualify. Applicants are required to meet certain income and asset criteria before they can receive the pension.

The GAO report found that some organizations, financial planners and insurance agents are promoting products that may not be suitable for a veteran in an effort to quality the individual for the VA pension. While the VA accredits financial planners and lawyers to aid veterans in the application process, it does not endorse any particular product to help pay for long-term care.

Specifically, some firms are trying to sell deferred annuities to aged veterans. In one instance, an organization presented a financial plan to 86-year-old veteran that included the purchase of both an immediate and deferred annuity “that would generate payments only after the veteran’s life expectancy,” the GAO stated.

Deferred annuities, the GAO and NAIC pointed out, may not be appropriate for elderly veterans since the product could tie up funds needed for future expenses. Moreover, funds may not be available to the veteran during his or her lifetime or may not be accessed without incurring high withdrawal fees. “An annuity is not an investment product to help reach a short-term financial goal,” the NAIC Consumer Alert wrote.

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