In a previous post I discussed the sales boom in deferred income annuities (DIAs). Part of the products’ appeal to clients is their relative simplicity, at least when compared to variable annuities’ income benefits.
But that simplified product design doesn’t mean you can stop your analysis by picking the DIA with the highest payout rate. Clients will value some contract benefits more than others, which means matching up their preferences with the right product. Also, as the number of available DIAs grows—the count is up to 16 issuers as of mid-May—the competition is heating up and insurers are introducing a broader range of contract features.
I recently spoke with Burlington, Iowa-based Thrive Income (www.thriveincome.com) CEO Curtis Cloke, CLTC, LUTCF, RICP about what he’s seeing in the DIA market. Cloke, who’s also a MDRT member, started using these annuities in 1999 and frequently speaks to industry groups about their planning applications. Here are some of the key product trends he’s monitoring.
Payout options. Very few clients opt for a life-only DIA in Cloke’s experience due to concern over the risk of premature death and the subsequent payment stoppage. That means advisors must evaluate the contracts’ payout options: installment refund, cash refunds or a lifetime payment combined with a level period certain.