Can I Cancel My Annuity?
A variation would be: "If I needed money for an emergency could I close my annuity and get some or all of my premium back?"
The correct answers to each of these questions are "yes" and "no". So let's explore each in depth and see when you can and when you cannot remove money from an annuity.
Your right to a free look
Every annuity comes with a legal right to a “free look.” For a limited time you can get out of the annuity and request all your money back even after the policy has been issued and the initial premium is at the insurance company.
How does that work? When you apply for your annuity, the company takes several weeks to set up your account and print and mail your policy to you. Any time during this period you can call your agent or the company and cancel your purchase.
Plus, even after you've received your printed contract you still have a limited 10- to 30-days to cancel it for a full refund. Because annuities are regulated at the state level, each state has a specific time period for the "free look." That clock starts ticking when the policy is delivered to you. The free-look provision allows you to get your money back no questions asked. You don't have to talk to the agent who sold you the annuity. You can simply contact the insurance company directly and ask for a full refund. No reason or explanation is needed. This is your right.
But what happens after the free look period ends?
First, I always caution buyers to never purchase an annuity if you are not serious about keeping it for its intended duration. At the very least, take a realistic view on how much money you can tie up in the annuity. Most annuities are very illiquid and there are restrictions on withdrawals.
If they are available at all you will likely suffer penalties or losses. The insurance companies have designed them this way because their economics only works if you make a long-term commitment.
The most common reasons you might look to get out of an annuity contract would be a financial emergency, changing life situation or the realization that you tied up too much money in the annuity. Suddenly the idea of unlocking a large sum of my money becomes very appealing. Even though you hope that will never be the case for you, it’s wise to consider your options before you buy.
The rules and consequences of cancelling vary by type of annuity.