A change in thinking also appears to be underway. Surveys by LegalZoom.com, an online document-preparation site, revealed that the number of people who believe that having a will is important dropped last year, to 75% in 2003 from 85.4% in 2002. Also, significantly fewer people intend to draft this document in the near future.

Annuity Industry Brings Back Shorter-Term Guarantees

For the annuity industry, what‚s old is new again.

Faced with potentially higher interest rates and a shift in investors‚ concerns, annuity providers are bringing back some of the fixed-rate products they were temporarily forced to shelve when the prolonged drop in rates made it difficult to profitably support them.

Some companies are switching back to offering shorter-term interest rate guarantees on some of their fixed annuities. "We‚ve seen more companies developing one-year products as opposed to multiyear guarantees," says Tim Pfeifer, a consulting actuary at Milliman USA in Chicago. "Customers are a little bit concerned about locking in rates."

Annuity providers are also rolling out another type of deferred fixed annuity designed to appeal to investors looking to participate in the rising stock market. Sales of equity-indexed annuities–where interest is linked to a market index, usually the Standard & Poor‚s 500–are clocking a run rate of about $16 billion to $17 billion for the year, up from $14 billion in 2003, says Jack Marrion, president of Advantage Compendium, a research consulting firm in St. Louis.

What makes these products especially appealing–or at least an easier sell–is the promise to investors that they have it both ways. With equity-index annuities, conservative investors looking to participate in stock market gains will see the value of their annuities increase if the index value increases; if the index falls, the annuity won‚t earn anything but their original investment is guaranteed.

Meanwhile, those worried about missing out on higher returns if rates start to rise can opt for products that lock in rates for only one year compared with the longer-term guarantees that were popular when interest rates were falling

However, experts warn that consumers are taking on some risk that the company may or may not credit a rate that‚s reflective of prevailing market rates. Glenn Daily, a fee-only insurance consultant in New York, figures that fewer than half of single premium annuity contracts met consumers‚ expectations about performance after the initial guaranteed rate expired. A better option, he says, is to look for contracts where the guaranteed rate period and surrender period are the same.


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