Annuity Complaints: Where to Report Problems

Annuities can be useful for some long-term goals, but they are also among the more complex financial products people buy. Problems often show up later: a surrender charge you did not expect, a return lower than you thought, or a sales pitch that did not match the contract. If something went wrong, the first challenge is knowing who to contact. This guide explains, in general terms, where annuity complaints usually go and how to prepare.

What an annuity is

The SEC's investor education site, Investor.gov, describes an annuity as a contract between you and an insurance company designed to meet retirement and other long-term goals. You pay a lump sum or a series of payments, and the insurer agrees to make income payments to you, either right away or later. Investor.gov also warns that taking your money out as a lump sum may bring surrender charges, taxes, and tax penalties.

The same page notes that an insurer's obligations under an annuity depend on its financial strength and claims-paying ability. In other words, an annuity is only as strong as the company behind it.

Why the type of annuity matters for complaints

Who regulates an annuity depends on what kind it is. Investor.gov explains it this way:

• Fixed annuities are insurance products regulated by state insurance regulators.
• Variable annuities are both insurance products and securities. They are regulated by state insurance regulators and registered with the SEC.
• Indexed annuities are all regulated by state insurance commissions, and the SEC regulates only those that are securities, according to Investor.gov's bulletin on indexed annuities.

Your contract, and any prospectus you received, should help you tell which type you have. If you received a prospectus, the annuity is likely a registered security, but confirm this with the documents themselves.

Where to report annuity problems

Your state insurance department

For most annuity problems, the state insurance regulator is a key place to complain. Investor.gov points readers to the National Association of Insurance Commissioners, the national organization of state insurance commissioners, which links to each state's insurance department.

The SEC

If your annuity is a security, such as a variable annuity or a registered indexed annuity, you can also contact the SEC. Investor.gov's questions and complaints page says that if you have a problem with your investments, your investment account, or a financial professional, you can use the SEC's investor complaint form.

FINRA, for sales practice problems

Investor.gov's variable annuities page describes FINRA as an independent self-regulatory organization that regulates the securities industry, including sellers of variable annuities. It says complaints about sales practices involving variable annuities can go to a FINRA District Office. The indexed annuity bulletin says the same for sellers of some indexed annuities.

You can file with more than one office if your problem involves both the product and the person who sold it.

Common types of annuity problems

• Surrender charges. Investor.gov explains that withdrawals during the surrender period may bring a surrender charge, and that this period can last several years.
• Exchanges. Investor.gov warns that some financial professionals may have a financial incentive to suggest exchanging one annuity for another, and that an exchange can bring a new surrender charge period.
• Returns lower than expected. For indexed annuities, features like caps, participation rates, and spreads can mean you are credited with less than the index gain.
• Contract adjustments. Some contracts include market value adjustments that can lower the value of an annuity when money is taken out early.
• Sales statements. What you were told may not match what the contract says.

The free look period

Investor.gov says state law gives you a set number of days to change your mind after you receive an annuity contract, often called a "free look" period. Your contract should state how long it is and how to return the contract. The length can vary by state. If you just bought an annuity and have doubts, check this date right away.

How to prepare a complaint

Gather your documents before you file:

• The annuity contract and any prospectus.
• The application and any forms you signed.
• Account statements, including the first one and the most recent one.
• Any sales materials, illustrations, emails, or notes from meetings.
• Records of surrender charges or fees taken.
• The name of the person who sold you the annuity and their firm.

Write a short, factual summary: what you bought, when, what you were told, what happened, and what you want, such as a refund of a charge or a correction. Keep copies of everything you send.

Before you buy or exchange an annuity, Investor.gov suggests asking a basic question: how much of your money goes to work for you and how much goes to fees and expenses.

When to talk to a lawyer

A complaint to a regulator can lead to a review, but a regulator does not act as your personal lawyer. Many people also talk to a lawyer when the amount is large, when they believe they were misled, when an older relative was sold an unsuitable product, or when there may be a deadline to bring a claim.

Lawyers who handle annuity disputes may focus on securities, insurance, or elder law. Some also help with estate planning and probate when an annuity is part of a family's plan. Ask how often they handle annuity cases, how they charge, and what forum the dispute may go to. Get fee terms in writing.

Frequently asked questions

Is an annuity complaint handled by the SEC or my state?

It depends on the type. All annuities are subject to state insurance regulation. Annuities that are securities are also under the SEC, and sales practices may involve FINRA.

Can I cancel an annuity I just bought?

Many states give a free look period. Check your contract for the length and steps.

Will a complaint get my money back?

Not necessarily. A complaint may lead to a review or a response from the company. A lawyer can explain other options.

What should I do before exchanging an annuity?

Compare fees, surrender charges, and features of both contracts, and ask whether a new surrender period would start.

Related: Browse more legal guides and estate planning and probate lawyers.

General information, not legal advice. Laws change and every case is different — talk to a licensed attorney about your situation.