Changing or Cancelling an Annuity
Changing or cancelling an annuity typically isn’t easy, but there are a couple of windows of opportunity to consider:
Most annuities come with a guaranteed "free look period" after you purchase the contract. This allows you to review the terms and conditions and change your mind without penalty.
The free look period can vary depending on the province or territory you reside in, but it usually falls within 10-30 days of receiving the annuity contract.
Crucially, contact your insurance company directly to initiate the cancellation within this window.
Once the free look period expires, changing or cancelling an annuity becomes more complex and might involve surrender charges.
Surrender charges:
These are fees imposed by the insurance company if you withdraw your money from the annuity before the maturity date (end of the payout term).
The amount of the surrender charge can be a significant percentage of your initial investment, and it generally decreases over the years.
Some exceptions might exist:
There could be provisions for penalty-free withdrawals for certain circumstances like terminal illness or nursing home care. These exceptions depend on the specific terms of your annuity contract, so be sure to read it carefully.
Here's a quick recap:
Free Look Period:
Your best chance for a hassle-free cancellation is within the free look period. Contact your insurance company directly if you want to cancel during this time.
After Free Look Period:
Surrender charges apply, and the amount can be substantial. Review your contract and understand the specific fees involved before attempting to change or cancel.
Considerations
While life annuities offer guaranteed income, there are some things to keep in mind:
Loss of Flexibility
Once you invest in a life annuity, your access to the money may be limited.
Lower Returns:
Similar to retirement accounts, contributions may grow tax-deferred, and withdrawals may be taxed favorably.
Fees:
There may be fees associated with annuities, such as surrender charges if you withdraw your money early.
Due to the complexities involved, consulting with a financial advisor is recommended before making any decisions about changing or cancelling your annuity. They can help you understand your options, the potential costs associated with surrender charges, and explore alternative solutions that might better suit your needs.
- info@annuitiesincanada.ca
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- Life www.annuitiesincanada.ca Inc. 1120 Bay Street Gravenhurst, Ontario P1P 1Z9
