A team of lawyers says life insurers should make some effort to compare annuity deferral periods with customers life expectancies.
The team, led by William Shernoff of Shernoff Bidart & Darras L.L.P., Claremont, Calif., has filed a suit concerning the deferral period issue in a state court in Los Angeles.
The complaint accuses Midland National Life Insurance Company, West Des Moines, Iowa, of selling annuities with payment schedules calling for payments to start long after the end of the purchasers projected lifespans.
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The complaint identifies one annuitant, John Migliaccio, who was 73 in 2003, when he used $42,942.99 that had been in an annuity issued by a unit of Conseco Inc., Carmel, Ind., to buy a flexible-premium deferred annuity from Midland National.
The annuity was scheduled to mature in 2045, and it provided only minimal access to principal for the first 13 years that the annuity contract was in effect unless Migliaccio and his wife, Carmen, paid substantial surrender charges, according to the complaint. Migliaccio died 17 months after buying the annuity.
Midland National has a rule requiring agents to get special permission before selling flexible-premium annuities to applicants over age 70, but it seems to have been granting age exceptions automatically, according to the complaint.