Annuity
surrender charge is an asset to your sales presentationThe surrender charge protects the carrier.
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| The Surrender Charge is an Asset to your Sales Presentation |
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Ever wonder why most annuity policies have a surrender charge? The surrender charge in fact acts in the best interest for your clients because it makes possible a higher credited interest rate (and participation rate for the indexed annuities). Annuity carriers invest the premium dollars in debt securities such as bonds and mortgage loans. Under normal market conditions, the longer the investment horizon, the higher the return. This is called the yield curve. The surrender charge protects the carrier somewhat against the risk of clients who withdraw their money in order to place it elsewhere in hopes of a higher rate of return. This allows the carrier to go farther out (longer) on the yield curve to capture a higher return. The interest earned, less the carrier's spread, is passed along to the client. So contrary to what your clients may currently feel , a reasonable surrender charge actually serves their interest by making possible a higher interest rate. |
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