Q: How do Insurance Companies view their clients?
A: When you purchase a Deferred Annuity, you probably think of yourself as an Investor. An Insurance Company, however, sees you more as a Policyholder: a statistic, whose attributes are of more insurance-oriented; i.e., a specific age and gender, whose goals and future behavior are rather fuzzy.
However, there are many possible current and future options available to the DA Investor, some of which will more favor the DA investor compared with some which will favor the Insurance Company; and that, if exercised, a certain combination of options and their timing, will produce the maximum financial returns to the DA investor.
You will probably not know which options that you can exercise are most beneficial. it's complicated, and generally, Insurance Companies will not be inclined to point it out to you.
HOW DOES THIS WORK?
Simply put, when Insurance companies issue a Deferred Annuity Policy, their actuaries try to predict what will happen in the future so that they can minimize any risks for the Insurance Company and make a profit on the money invested with them. These predictions use very complicated Actuarial mathematics and fall into 3 main categories:
A DA Investor cannot do anything about (1) and very little about (2), other than stay as healthy as possible. However, (3) is a different kettle of fish altogether.
POLICYHOLDER BEHAVIOR
Insurance company actuaries attempt to predict the future by applying the "Theory of Large Numbers". That is, they cannot accurately predict what any individual DA Investor will do, but they can predict, on average, what a large number of them, in a similar category, would do.
Without getting too technical, they assume that a certain percentage of DA Investors will exercise 'smart' options, while others will exercise 'stupid' options. That's how they make their money. It's the 'stupid' DA Investor that pays for the 'smart' DA Investor, and for the Insurance Company's profits.
Remember, when a DA contract is issued, an Insurance Company will project scenarios many years into the future, and try to guess the DA Investor's future priorities, and general future economic conditions, (say) 5 years from Issue. In contrast, 5 years after Issue, the DA Investor doesn't have to guess. This is a big advantage, as the DA Investor can then make decisions on known, actual goals and conditions e.g. their health, not predicted ones made 5 years ago by the Insurance Company's Pricing Actuaries.
In general, the longer the DA Investor keeps their contract in force, the better their options and the bigger the financial rewards.
SUMMARY
DON'T BE ONE OF THE 'STUPID' DA INVESTORS.
USE THIS WEBSITE TO HELP YOU EXERCISE THE 'SMART' OPTIONS, SO THAT YOU WILL BE ONE OF THE 'SMART' DA INVESTORS!
A: When you purchase a Deferred Annuity, you probably think of yourself as an Investor. An Insurance Company, however, sees you more as a Policyholder: a statistic, whose attributes are of more insurance-oriented; i.e., a specific age and gender, whose goals and future behavior are rather fuzzy.
However, there are many possible current and future options available to the DA Investor, some of which will more favor the DA investor compared with some which will favor the Insurance Company; and that, if exercised, a certain combination of options and their timing, will produce the maximum financial returns to the DA investor.
You will probably not know which options that you can exercise are most beneficial. it's complicated, and generally, Insurance Companies will not be inclined to point it out to you.
HOW DOES THIS WORK?
Simply put, when Insurance companies issue a Deferred Annuity Policy, their actuaries try to predict what will happen in the future so that they can minimize any risks for the Insurance Company and make a profit on the money invested with them. These predictions use very complicated Actuarial mathematics and fall into 3 main categories:
- Current and future economic conditions, e.g. Interest rates, bond and equity returns, indexes
- "Acts of God," e.g. Death and Disability
- Policyholder behavior, i.e. what options Policyholders exercise, e.g. Surrender, Free Withdrawals, Annuitizations or Guaranteed Income Benefit Riders (GIBs), and when these options are exercised.
A DA Investor cannot do anything about (1) and very little about (2), other than stay as healthy as possible. However, (3) is a different kettle of fish altogether.
POLICYHOLDER BEHAVIOR
Insurance company actuaries attempt to predict the future by applying the "Theory of Large Numbers". That is, they cannot accurately predict what any individual DA Investor will do, but they can predict, on average, what a large number of them, in a similar category, would do.
Without getting too technical, they assume that a certain percentage of DA Investors will exercise 'smart' options, while others will exercise 'stupid' options. That's how they make their money. It's the 'stupid' DA Investor that pays for the 'smart' DA Investor, and for the Insurance Company's profits.
Remember, when a DA contract is issued, an Insurance Company will project scenarios many years into the future, and try to guess the DA Investor's future priorities, and general future economic conditions, (say) 5 years from Issue. In contrast, 5 years after Issue, the DA Investor doesn't have to guess. This is a big advantage, as the DA Investor can then make decisions on known, actual goals and conditions e.g. their health, not predicted ones made 5 years ago by the Insurance Company's Pricing Actuaries.
In general, the longer the DA Investor keeps their contract in force, the better their options and the bigger the financial rewards.
SUMMARY
DON'T BE ONE OF THE 'STUPID' DA INVESTORS.
USE THIS WEBSITE TO HELP YOU EXERCISE THE 'SMART' OPTIONS, SO THAT YOU WILL BE ONE OF THE 'SMART' DA INVESTORS!
