Ad Review Tip – Income Riders

A guaranteed lifetime rider or benefit (GLB) is an additional feature available on some annuities. Generally it comes with an additional cost. Sometimes called guaranteed income benefits or guaranteed withdrawal benefits, GLBs are designed to provide options above and beyond standard annuitization or free withdrawal features in annuities. Guaranteed income benefits typically provide an alternative to annuitization by using a separate value (known as the benefit base) from the account value to draw income payments from while guaranteed withdrawal benefits are designed to provide periodic withdrawals based on a percentage of the benefit base rather than the contract account value. 

Here are a few tips to keep in mind when working on advertising materials that promote GLB riders:

  • When marketing the optional riders available on annuities, it is essential to first establish base information about the basic product before discussing the rider.
  • Riders that can be cancelled or terminated should not be positioned as part of the base contract. Discussion of the base annuity should not include attributes of a rider unless it is disclosed that the feature is in the rider and not the contract.
  • Consumers must have a clear understanding of and the need for the base product. Marketing materials should reflect the contract rather than marketing and selling a product based primarily or solely on a specific feature or optional rider. Some key elements of the product that should be discussed ahead of the rider discussion include surrender charges, tax deferral, death benefit, interest crediting etc.
  • It should be clear (generally in the body copy or other proximate location) that the GLB riders are generally optional and available at an additional cost, if such is the case.
  • Specific options may vary widely by carrier and product, so any general marketing materials should make note of this.
  • Generally, the following disclosure regarding distributions/withdrawals should be included:

Any distributions and withdrawals are subject to ordinary income tax and, if taken prior to age 59½, a 10% federal additional tax. Withdrawals will reduce the contract value and the value of any protection benefits.

  • In addition to disclosing actual rider charges (or range of charges), the following should also be disclosed: frequency with which the rider charge is deducted (e.g., monthly or annually: If the charge is annual but deducted monthly, then this fact should also be disclosed.), against which value the rider charge is being deducted from (e.g., accumulation value or withdrawal value), how income will be determined and, upon surrender, the amount the client will receive as described in the contract.
  • If the material discusses rollup rates, it must be clear that these rates are applied to the benefit base, which is never available as a lump sum. 

Questions? Please email the Currin Compliance Services Ad Review team or call 518-692-2494.