Can I Cancel My Annuity?

Written by Hersh Stern Updated Friday, May 17, 2024

First-time annuity buyers often ask this question: "If I change my mind can I cancel my annuity and get my money back?"

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.

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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.

What are those rules?


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Comments (8)

  1. Edward M.
    2014-10-27 15:44:08

    How do I go about buying a deferred annuity within my rollover IRA?

  2. Hersh Stern (
    2014-10-28 15:36:05

    Hi Edward-

    You asked about buying a deferred annuity within a rollover IRA.

    There are two types of deferred annuities you might be considering:

    1. Deferred income annuity (DIAs) - this is like an immediate annuity but with a delayed start date. Generally, DIAs cannot be cashed out so this purchase would be irrevocable.

    2. Deferred Multiyear or Index annuity- this type is somewhat like a bank certificate of deposit but without FDIC coverage. Index annuities are also somewhat like mutual funds but with limited upside growth and full downside or loss protection. These annuities can be cashed out at a later date.

    All the above annuities can be purchased with IRA monies. You start by investigating the various types and deciding which type to buy and from which insurance company. The carrier's application paperwork will include an IRA transfer authorization form. This tells your present IRA custodian to release your money to the insurance company. Such a transfer is called a "direct transfer" (custodian to custodian) and should not create a taxable event.

    If you have particular questions please call me at 800-872-6684. I'd be happy to discuss your plans with you.


  3. Lynne
    2015-09-14 09:37:48

    I purchased a variable annuity a few months ago and it is now beyond the "Look free" period. My financial adviser explained the details of it to me, quoting the percentages for the M & E expenses. Recently, another financial adviser evaluated it for me and explained what those percentages translated into dollar amounts. I was appalled! What are my chances for cancelling this annuity? I had no idea what it would cost me, therefore I want my money back and without the surrender fee applied.

  4. Hersh Stern (
    2015-09-14 09:39:59

    Hi Lynne-

    First, I want to establish that I don't sell variable annuities so I am not an expert in how that type of annuity works. My comments are more general in nature about how one might approach trying to cancel an existing annuity.

    Start with the agent who sold you the policy. What did he or she suggest when you told him you wanted to cancel your contract? Even if he agrees with you, frankly, know that there may not be much he can do to influence the insurance company in your favor. Most companies will not reverse a contract unless there is clear evidence of malpractice on the agent's part or there was written evidence of misinformation or misstatements in the paperwork or presentations.

    Also, keep in mind, that the application paperwork probably included a page you signed saying that you understood how the annuity worked and how its expense ratios would be calculated. So it may be difficult to make a case that you were not told that information.

    After discussing your options with the agent, call the issuing company. Keep a record of the dates, times, names, extension numbers of all employees you speak with and what was discussed or promised. Insist that a note with your request and complaint be added to the company's recordkeeping system so it can be referred to later on. If you feel you're not getting the right attention ask the customer service rep to escalate your request to a supervisor.

    Finally, if after discussing your concerns with the company's reps, you still feel you are not getting a fair hearing, you can contact your state insurance commissioner's office and or the federal regulators who oversee the marketing and administration of variable annuities. They may be able to help you if there's clear evidence that the agent violated the regs or practices required when selling this type of annuity.


  5. Luis
    2023-04-25 15:30:55

    Regarding annuities, recently i requested 401k(Thirfy saving) for monies in the account close. They reply with check to be delivered. Somewhere, this turns into a annuity with. METLIFE, so I call MetLife and indicate that i in the grace period for cancelling, they indicate that this needs to be done by the "TSP". The TSP indicates that are irreversible,
    and I said well i haven't receive no monies from MetLife and they insist that TSP can reverse the same
    Question? I'm doom or is there light at the end of this tunnel. Appreciate any feedback, thanking in advance

  6. Kyle
    2023-04-26 16:59:35

    Hi Luis,

    Thank you for reaching out.

    Generally, when you purchase an annuity there is a free-look period of at least 10 days, during which you can cancel your contract and be refunded. However, we're not sure whether a 'TSP direct to MetLife' annuity purchase might receive different treatment.

    We would recommend reviewing your annuity contract to see whether there is a mention of a "free look period," and then working with TSP/MetLife to resolve the issue.

    Best of luck!

    - Kyle

  7. Rob P.
    2023-07-12 16:43:30

    How is the look free period determined? I just purchased a fixed annuity through Fidelity (Mass Mutual) and I'm not sure if I can get out without paying a penalty. I signed the contract on June 12th. I live in Texas. I'm wondering if I can cash out. I heard that I had 3 months for the look free period from another source.

  8. Kyle
    2023-07-13 11:26:00

    Hi Rob,

    Thank you for reaching out. Free look periods are always at least 10 days, but can be as long as 30 days from the date you receive your contract booklet. You should see the length of your free look period listed in the first few pages of your contract.

    We would have to recommend that you reach out to Mass Mutual for guidance on your particular case.

    Best of luck,