You can buy a lot of things online these days, including financial products like insurance, stocks, and mutual funds. Buying annuities online is another story, though. While you can do some preliminary research, and even request a quote, you typically can't buy an annuity online. Let's take a look at why you can't buy an annuity online, how you can buy annuities, and what to look for in an agent or broker selling these products.
- There is an established distribution method for annuities using brokers and insurance agents.
- You can't buy an annuity online because they are complex; it's in your best interest to talk in person and make sure an annuity is right for you.
- You can find an annuity by talking to an experienced insurance agent or broker or working with a financial planner.
Why You Can't Buy an Annuity Online
One reason you typically can't buy annuity online is that companies don’t want to disrupt their primary distribution source: insurance agents and brokers. This is a model that's worked well for companies and agents alike. Agents and brokers are paid a commission when a client buys an annuity. They can also cross-sell products to clients. Companies benefit from good agents and brokers educating clients and building relationships. It's a win-win from the company and agent perspective.
While it might be frustrating as a consumer to have to talk to a real person, there's another reason for it: annuities are complex, and not the right fit for everyone. A responsible agent will get to know the client and the client's financial goals and make sure an annuity is a good fit.
Agents also educate clients about annuities and how they work, and may also coordinate with a client's other financial advisors (accountants, financial planners, etc.) to put plans into place. Annuities are complicated, and including a human in the process helps to ensure that you understand the product you're purchasing.
How to Buy an Annuity
If you can't buy an annuity online, how do you buy one? You have a few options.
- Search by agent or broker: Look for an experienced insurance agent or broker. Some insurance agents work with multiple insurance companies, while others work exclusively for one company. Insurance brokers work on your behalf to find annuities and other insurance products that meet your needs. Before you work with an agent or broker, check out the agent with your state's insurance department to make sure they are appropriately licensed.
- Search by company and product: Another way to buy an annuity is by researching insurance companies and their annuity products. As you research, consider the financial strength of the company and which annuity products it offers. In general, you'll see three different types of annuities: fixed, indexed, and variable. Fixed annuities have a fixed interest rate, indexed annuities tie your interest rate to an index like the S&P 500, and variable annuities invest your premium into investments like mutual funds. Although companies may not have all the fine print on their websites, you can get a sense of its products. Once you find a company or annuity you like, contact the company to connect with an agent.
- Work with a financial planner: A financial planner is someone who has in-depth knowledge on planning for specific financial goals like retirement. While a financial planner may not sell annuities, they can advise you on whether annuities are a good fit for your financial plans and which ones to buy. They may also be able to refer you to a trusted agent or broker. Look for a financial planner with an excellent reputation and who you have a good rapport with.
Variable annuities may include an element of risk, which means you could lose money on your investment. It's critical to carefully review the fine print before buying these, or any, annuities.
What's Next With Buying Annuities
Many websites allow you to research annuities, and they may even claim that you can buy one. Make sure you read the fine print before signing up with these sites, though, as most of these sites state that when you request a quote, you're giving an agent permission to contact you. Unless you want endless, persistent phone calls and emails, it's best to research and then contact agents or companies directly.
Will it ever be possible to buy an annuity directly? It's difficult to know. It seems like that as we continue to move more of our financial interactions online, annuities will eventually follow suit. In the meantime, you can at least independently research and find the right annuity for your situation.