Why the growing interest in annuities?

As the first quarter came to a close, Farmers Life Insurance experienced a dramatic increase in sales of traditional annuities. Through March 31, Farmers customers have placed more than $14.3 million in new annuities so far this year, up from $9.5 million in the same period last year.

Annuities provide customers with competitive interest rates in a low-interest-rate economy. Five-year certificates of deposit currently yield an average of less than 2.6%. Even ten-year Treasuries, which carry some investment risk, yield less than 3.9%(1). In this environment, annuities offer attractive current interest rates and guaranteed minimum interest rates, backed by the financial strength and claims paying ability of Farmers Life.

Annuities also offer unique advantages – as the NAIC explains, “Annuities are most often bought for future retirement income. Only an annuity can pay an income that can be guaranteed to last as long as you live.”(2) And the interest credited to annuities in the accumulation phase of the contract accrues tax-deferred, boosting the effective yield. This is especially attractive for higher-income customers who have maximized other tax-advantaged retirement vehicles.(3)

1 Current interest rates obtained March 31, 2010, from Bloomberg.com. 2 Buyer's Guide to Fixed Deferred Annuities, National Association of Insurance Commissioners. 3 This blog is for informational purposes only. You should consult your attorney, accountant or tax adviser for legal or tax advice. Life insurance issued by Farmers New World Life Insurance Company, Mercer Island, Washington 98040. Products and features may not be available in all states and may vary by state.