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9 Factors That Drive Annuity Purchase Decisions

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A new analysis published by LIMRA shows the reasons why investors choose to purchase annuities vary widely, and there does not seem to be one standout reason cited by a majority of survey respondents.

As the report explains, the decision to buy an annuity (or not) can be a complex one, as is the decision regarding which type of product to buy from which carrier. As such, and as LIMRA’s data shows, buyers list many reasons for their purchases.

The most important factor cited by the largest number of investors was the ability to generate guaranteed income while continuing to be able to access their account value. Other things that influenced investors’ decisions include the interest rate or projected return of the annuity; the ability to annuitize the contract and receive guaranteed lifetime income; and protection of principal.

According to the data, what is important to annuity buyers varies significantly based on an investor’s age and life stage. Older buyers, who often have more conservative investment allocations, are more likely to cite protection of principal. Younger buyers, on the other hand, tend to lack pensions and may have more unanticipated expenses. This group is more inclined to cite the guaranteed income features and access to their account balances.

“Understanding the mindset of recent annuity buyers can help the industry improve its products and services,” the report suggests.

According to LIMRA, as income-generating features are the most important attributes in the buying decision of deferred annuities, financial professionals should highlight these in their meetings with clients and prospects.

See the slideshow for data highlights from LIMRA’s latest survey.