The "I'm Going to Shop Around First"

DE PERE, Wis. - June 11, 2013 - PRLog -- In that my office generally does not work with the public, but rather with attorneys and insurance agents, I don't hear this as often as I'm sure you do when it comes to plans involving Medicaid Compliant Annuities.  I'm referring to the old "I'm going to shop around first and find a better rate," or "my family financial planner can probably just get this for me."

Annuities are nothing new. We all know that they're a popular insurance product. And we all know the basic premise behind an annuity - it's designed to be an investment vehicle.  Whether the purpose of that vehicle is to sit and accrue interest, or to provide guaranteed income at a rate greater than what was invested, the primary intent of investment is to obtain a greater economic result.

Understandably, this is what leads to the "shop around" thought process.  The problem is that Medicaid Compliant Annuities do not place as much importance on the usual annuity purpose of being an investment vehicle.  Rather, they were created with a specific purpose in mind - complying with the Deficit Reduction Act of 2005.  That being said, they are not competitive products.  The rates will not be comparable to that of a traditional annuity you find at your local bank.  They aren't going to make you rich.  Then again, considering the recent rates I've seen of traditional annuity investments, neither will they!

So what can you do? You can encourage your client to shop around; however, it's important that they have realistic expectations before doing so.

They should know this is different than a traditional annuity investment.  This is a special product offered by a limited number of insurance companies and a limited number of insurance agents.  Even of the companies that do offer the product, if the client was to call the company directly and ask about it they would most likely be told it doesn't exist, or be given incorrect and incomplete information.  This is due to the fact that the departments that deal with the product are very small and specialized.  Clients should also know that the rate of return isn't competitive.  Usually the only way to obtain a better rate is to stretch the term out.  However, this in turn increases the possibility of an untimely death and Medicaid claim repayment.

I always encourage clients to shop around.  I can certainly understand the need to understand a process prior to proceeding, and the peace of mind that comes along with doing so.  Notwithstanding the above, the client should start their research process with realistic expectations so as not to exhaust themselves during an already trying time.  My office also works with a wide range of companies, and can help expedite the shopping process.