Before buying an annuity, independently verify the seller, the insurance company, the payment instructions and the contract terms. Pressure to move money before you can do those checks is a reason to pause.
An annuity can be legitimate and still be a poor fit for your needs. High charges, limited access to money or an unsuitable recommendation are not automatically proof of fraud. The goal is to understand both who you are dealing with and what you would be buying.
First, confirm who is actually selling the annuity
Ask for the seller’s full name, license information, firm name and the legal name of the insurer issuing the contract. Use your state insurance department to verify the seller’s insurance license and the insurer’s authorization in your state. Check any insurance agency involved as well. Find the regulator’s contact details independently.
A convincing website, familiar logo or local seminar is not a substitute for verification. Check that the person contacting you matches the licensed person and company. Impersonators can borrow the details of real businesses.
Insurance licensing and state product approval do not mean a regulator endorses the recommendation or guarantees your results. The NAIC’s insurance fraud guidance describes risks including unlicensed sales, fake policies and diverted premiums.
All annuities are regulated by state insurance authorities. Variable annuities and registered index-linked annuities, or RILAs, are also securities and have prospectus disclosures. Investor.gov explains the main annuity types. For a variable annuity or RILA, check both the seller and brokerage firm through FINRA BrokerCheck. If someone is acting as an investment adviser, check the individual and advisory firm through Investment Adviser Public Disclosure. Match the names, registration status and firm affiliation to the person contacting you. A fixed indexed annuity and a RILA are different products.
Verify payment instructions before moving money
Contact the insurer through an independently verified number and confirm the application, payee, destination and payment method. Do the same if someone sends changed wire instructions or says a different account will process the payment faster.
Requests to pay a person’s private account, use gift cards or send cryptocurrency deserve immediate scrutiny. Depending on the transaction, a regulated intermediary may be involved; the key is independently confirming the legitimate process rather than accepting instructions from the person asking for money.
Keep your application, payment confirmation and correspondence. If the expected contract does not arrive, contact the insurer directly rather than relying only on the seller’s explanation.
Ask what the appealing number actually means
A large number in a presentation may describe something other than cash you can withdraw. Ask the seller to identify each figure in the contract and explain whether it is guaranteed, illustrated or used only to calculate a particular benefit.
An income benefit base may be a figure used to calculate payments under a rider. It is not necessarily the cash value or surrender value available to you. For example, New York’s insurance regulator distinguishes a variable annuity’s income or withdrawal benefit base from its cash surrender benefit. Ask for the contract provision explaining each value and what you could actually receive if you withdrew money or ended the contract.
Use questions like these to slow a sales conversation down:
| Sales statement | What to ask for in writing |
|---|---|
| “You get a bonus immediately.” | Which value receives the bonus, and can it be reduced or recovered if I leave? |
| “There are no fees.” | Are there rider charges, surrender charges or limits on credited interest? |
| “You can access your money anytime.” | How much can I withdraw, when, and what charges, adjustments or benefit reductions could apply? |
| “This new annuity is better than your old one.” | Which existing benefits would I lose, and what new costs or restrictions would begin? |
| “The illustration shows what you will earn.” | Which figures are contractual guarantees, and which are assumptions that may not happen? |
These statements are not all evidence of a scam. They are prompts to compare the presentation with the actual contract. NAIC’s annuity buyer’s guide includes questions about riders, charges, withdrawals and long-term needs.
Check access to your money and any replacement
Start with money you may need for ordinary bills, emergencies or planned purchases. Ask how the contract would handle those withdrawals rather than assuming all the money remains readily available.
A replacement can restart a surrender-charge period, create new costs or give up valuable benefits in the existing annuity. Ask for an old-versus-new comparison before agreeing to an exchange. FINRA explains annuity liquidity and replacement risks.
If the product names are still unfamiliar, our fixed annuity versus fixed indexed annuity guide explains that narrower comparison. Neither label, by itself, tells you whether the contract fits your budget or goals.
What if you already signed or sent money?
If you think you sent money to a scammer, contact your bank or payment provider immediately. Ask whether the payment can be stopped or reversed. Do not wait for the seller’s explanation before making that call. Save your messages and payment records. The FTC’s steps after a scam explain payment-recovery and identity-protection actions. Recovery is not guaranteed.
If you signed an application or received a contract, contact the insurer using independently verified details. Confirm whether the contract has been issued, record when you received it, and ask for the cancellation deadline, required steps and refund calculation in writing. Free-look cancellation rights depend on the applicable rules and contract. Do not assume that signing starts every deadline or that every cancellation returns the full amount paid. The NAIC buyer’s guide explains that refund treatment can vary.
Report suspected fraud to your state insurance department. Securities-related concerns may also belong with securities regulators. Before withdrawing from or surrendering an existing annuity, establish whether you are exercising a cancellation right or making a different transaction, because the consequences can differ.
Frequently asked questions
Is every annuity with high fees a scam?
No. A legitimate contract can be expensive or unsuitable for a particular buyer. Examine the costs and recommendation without assuming that an unfavorable feature proves fraud.
Does a licensed seller mean I can skip the checks?
No. Verify that the person is who they claim to be, confirm the insurer and payment process, and review the recommendation itself.
Is a guaranteed income figure the amount I can cash out?
Not necessarily. Ask for the contract’s cash value, surrender value and any separate income benefit base, along with the rules for each.
What if I am told the offer expires today?
Ask for the deadline and terms in writing, then verify them independently. Do not move money you do not understand simply to meet sales pressure.
Take the time you need to understand the contract
You should be able to explain who holds your money, how benefits work, when you can access funds and what leaving would cost. If those answers remain unclear, pause before committing.
For a general insurance-education question, contact ShieldWise. Use the insurer, your financial institution or the appropriate regulator for suspected fraud. Please do not put account numbers, payment instructions or private financial documents in the general inquiry form.
This article provides general education, not individual insurance, investment, legal or tax advice. Availability, charges, cancellation rights and guarantees depend on the insurer, contract and state. Guarantees depend on the insurer’s claims-paying ability.