Annuities and Insurance Arbitration and Litigation

Hanley Law is experienced in helping investors who have been victims of negligent misrepresentations and fraud related to the solicitation or sale of variable annuities, index annuities, fixed annuities, variable life insurance and other insurance products.  If a broker failed to discuss with you the risks of variable annuities or other insurance products or if the type of investment was unsuitable for you given your age, financial situation, and other factors, you may be able to recover your financial losses.


An annuity is an insurance contract between an insurance company and a customer. The customer pays the insurance company a specific amount of principal and in return has the option of receiving regular payments for life or a specific period of time, or the customer can choose to let the contract grow on a tax deferred basis until the money is withdrawn.   Annuity contracts have two distinct phases, the accumulation period and the payout period.

The payout period begins when the investor decides to “annuitize” the annuity by converting the assets that have accumulated into a monthly income stream which represents a return of principal and interest.

Insurance companies offer two general types of annuities, fixed and variable. Fixed annuities provide a specific rate of return while the return on a variable annuity depends on the investment returns of individual mutual fund sub-accounts subject to market risk.  Before investing in an annuity, a broker should determine whether or not the investment is suitable given the customer age, investments needs, station in life and risk tolerance.

Over the last several years the notoriety of annuities have grown and are often the subject of sales practice complaints. The reason for this is simple, annuities are often sold to customers because the selling commission is among the highest of all financial products available for sale to retail customers and because the commission is paid by the insurance company directly to the broker.  The high commissions stockbrokers generate on variable annuities is just one of the reasons why annuities are recommended to customers.   Annuities also provide a steady stream of commissions and sales charges to both the broker and the insurance company.  In fact, stockbrokers who sell annuities are often also paid an ongoing trailing commission.   Annuities are laden with administrative fees and mutual fund sub-account management fees.

Often annuity companies will entice customers will captivating phrases like “guaranteed” income or a “guaranteed”; death benefit.  Unfortunately for the investor, these promises are often not as they are initially represented.  Annuity products that offer such guarantees also include additional fees.   Annuity swaps or exchanges are also often unsuitable for the investor.  Investors are all too often convinced to switch policies for benefits that are deceptive and insignificant.  An annuity swap generates new commissions for the broker while penalizing the investor with avoidable surrender charges.

Variable Universal Life Insurance

Variable universal life (VUL) insurance is sold as life insurance with the opportunity to achieve market type returns in the cash value that are tax free to the variable life insurance policy beneficiary.  A variable universal life policy differs from a whole life policy in that VUL’s have a separate account which presents a variety of investment options; the VUL policy value may fluctuate based on the performance of underlying mutual fund sub-accounts; a minimum guaranteed death benefit is included; and a VUL is a security.  Before investing in a VUL, a broker should determine whether or not the VUL investment is suitable given the customer age, investments needs, station in life and risk tolerance.

Some VUL policies are structured through the payment of a single premium and additional premium payments become due because the mutual fund investments fail to service the premium needs of the policy.  Other VUL policies require annual premium payments that may become burdensome over time.  Variable universal life coverage that requires premium payments that a client cannot afford on a one-time basis or annually may be unsuitable for the investor and result in loss of principal payments and death benefits.

Hanley Law is dedicated to helping investors who have been victims of annuities and insurance fraud.  If you have lost money as a result of annuities or insurance fraud you may be able to recover your financial losses.  Contact us today for a free initial consultation.