FIA with a 150 percent death benefit and issue age up to 90 years oldArticle added by Roccy DeFrancesco on April 30, 2010
Roccy Defrancesco

Roccy DeFrancesco


Joined: May 24, 2006

Have you ever had an older client who wanted to pass a death benefit to his/her heirs but couldn't because of health issues? If so, this FIA might be of interest to you.

How does the product work? It's pretty simple. It's an FIA with the usual terms (caps, no risk of loss, etc.), but the annuity will pay a death benefit of 130 percent to 150 percent of the account value upon death to the heirs.


Assume you have a 75-year-old female client with $250,000 who is in poor health and who would like to pass the maximum amount of wealth to her heirs upon death. Assume she funds this FIA with a 4 percent bonus and dies the next year (assume the growth on the annuity in year one is 4 percent). The account value at death is $270,400.

Upon death, depending on the DB option chosen, the heirs would receive a death benefit of either 130 percent or 150 percent of the account value, which is $351,520 or $405,600.

Sounds great, right? The client could be sick and still buy this FIA. The client could be age 80-85 and even 90 years old and buy this FIA (which is normally unthinkable).


Wonder what the commissions are on this product? Usually when you get over 70, the commissions drop like a stone. From ages 0-80, the commission s 8.25 percent, 6.5 percent, from ages 81-85, and 3 percent for ages 86-90. Pretty fair, right? (The commission is decreased slightly if you use the 4 percent bonus).

What's the catch? It's one that can actually be a selling point. The catch is that the death benefit will be paid over a 15- or 25-year period (in equal installments). Initially, that sounds bad, but what do most heirs do when they receive $270,400? They spend it. With an annuity that will pay $351,520 or $405,600 over a 15- or 25-year period, your clients will guarantee that their heirs will not spend/waste the money all at once (or what can be nearly as bad, putting it into the stock market before a 59 percent crash like we've had recently).

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