Why Life Insurance Isn’t Always the Best Investment


I have two variable annuities and was advised to roll them over to a universal life single-premium policy that pays at least 5 percent. There are no taxable consequences involved in the rollover. I do have death benefits with the existing annuities, which are quite large. I was told that I could roll over all the money, but that it was better to leave $1,000 in the annuities to keep the death benefits. Because of the rollover, my beneficiaries would avoid federal taxes. Should I do this?

Calculate My FREE Annuity Quote Now!

  • Optional: For a 2-person annuity (joint lives)

No agent will call you

Your privacy is guaranteed.
Find advanced calculator options here.

Get quick answers to your annuity questions: Call 800-872-6684 (9-5 EST)


You are not allowed any kind of a freebie "rollover" or exchange from a variable annuity to a life insurance contract, says Geordie Crossan, president of financial planning firm NBS Financial Services, in Westlake Village, Calif. But it sounds to him as if you've lost money in your annuities and thus have no taxable distributions. So you're taking what's left to fund a life insurance policy.

Mr. Crossan suggests that you to ask yourself if you are looking for additional life insurance or an investment. If you want insurance, make sure you understand the costs associated with the policy, including surrender charges and renewal interest rates. Also be aware that commissions can be large and sometimes influence a salesman's recommendations.

If you're looking for an investment to use during your lifetime, understand that the cost of insurance can substantially reduce the interest earnings quoted to you. It may make sense to maintain your existing annuities, as this would preserve the death benefits. But you'll probably want to reexamine your investment selection if your existing asset allocation has lost money, Crossan adds.

Testimonial Image
I contacted Immediate Annuities.com to buy one of my immediate annuities. They were prompt, very responsive, paid attention to detail, understood my objectives, and were superb when it came to staying on top of seeing the funds transfer and issue of new policy documents through to completion.
Dr. David Babbel Professor Wharton School
Read 650+ verified reviews

Numerous other options - including mutual funds and bonds - may generate a better return with considerably lower expenses than variable annuities and life insurance contracts. Last, be sure to preserve your death benefits available under your existing annuities. If you fully surrender these annuities, they'll be lost.

Source: csmonitor.com - 04-09-2004

We'd love to hear from you!

Please post your comment or question. It's completely safe – we never publish your email address.

Add a new comment: (Allowed tags: <b><i>)

Comments (0)

There are no comments yet. Do you have any questions?