A How To Guide For Buying Annuities Online

Buying an annuity has always required effort—lots of effort.

First, you have to do your research (usually starting with What is an annuity? and What are the different types of annuities?) to determine if an annuity is right for your retirement plan.

Then, you have to choose an agent or life insurance company, which usually involves reading through a stack of prospectuses and listening to several sales pitches. After that, it’s time to apply, which means double-checking the annuity contract and reading the fine print.

And then you’ll probably have more time to wait while the insurance company applies your funds and issues your policy. Phew, right? In today’s modern world, nearly all financial services are online. From virtual tax advisors to digital banks—the financial industry is making it easier than ever to manage your assets.

So isn't it about time the annuity purchasing process got a little, well, simpler? Fortunately, change is happening: You can finally buy an annuity online.

Can You Really Buy An Annuity Online?

Yes. Now, remember that an annuity is an insurance product that can provide you with lifetime income. It can be an integral part of your retirement plan.

A deferred annuity is great if you want your money to grow tax-deferred over a period of time, and an immediate annuity is a fantastic option for retirees who need retirement income now. A small number of annuity providers have brought the annuity process into the 21st century. They allow you to buy certain types of annuities directly online without the hassle of going through an agent.

How Does Buying an Annuity Online Work?

Buying an annuity online is fast, simple, and safe. In sum, here’s the process you can expect.

1. Gather Your Information

First, you’ll need your social security number, bank account number, and routing number. If you’re adding an annuitant that’s different than yourself, you’ll need their information, too, including their date of birth, address, email, phone number, and social security number (or green card). And it is always advisable to name at least one beneficiary. The more information you can provide for the beneficiary, the easier it is for the insurance company to contact them when necessary.

2. Answer Some Questions

After you select your contract term and starting fund amount, you’ll be asked some basic questions.

Questions may include, “Do you have an emergency fund in place?” And, “Do you anticipate needing your money before 59½?” Don’t worry; these aren’t trick questions. Your annuity provider wants to assess your needs—as an insurance agent would—and make sure an annuity is the right fit for your retirement plan.

3. Choose the Annuitant and the Beneficiary

The annuitant is the person who’s entitled to the annuity payouts if you decide to annuitize your contract.

Yes, this might be you. But if you want someone else (like your spouse or kids) to get annuity payouts instead of you, you can name them. You'll still own the annuity. You just won't get the payouts. Beneficiaries, on the other hand, are people who will receive your annuity if you pass away before the contract is up. They'll typically be able to cash out the premiums you've contributed without paying surrender charges.

4. Decide How to Fund Your Annuity

At this point, you’re almost there. You just need to decide what money you will use to fund your annuity. Most people transfer money directly from their savings and checking accounts (hence why you’ll need your banking and routing numbers).

Although, you can also send a check or a wire. You can also fund your annuity with money from a 401(k) or IRA (money that's considered qualified funds). Or you can choose to transfer an existing annuity from another insurance company to Canvas. If you decide to fund using one of these methods, you may need to call your annuity provider.

5. Review Your Application and Sign

Double- (and triple-) check your information, sign your documents online, and boom—you have an annuity. Do a little happy dance! You’re about to have a guaranteed rate of return and, if you choose, guaranteed income in retirement!

What Are the Advantages of Buying an Annuity Online?

Buying an annuity online is not only simple, but it comes with some big perks. Here are a few of the most noteworthy ones.

1. No Agent Fees

Traditionally, insurance companies pay commissions to insurance agents who sell their annuities.

While you may not pay an agent directly, that doesn’t mean you’re off the hook: the commission is usually built into your rate of return. That means insurance companies will give you a lower interest rate in order to offset paying the agent who sold you your annuity. Buying an annuity online, however, means you don’t use an agent, so you don’t have to worry about their fees. And because the insurance company isn't paying commissions to agents, they can offer you a higher interest rate.

2. No Buying Pressure

The great thing about buying an annuity online? You don’t have to worry about someone pressuring you to buy the annuity right there, right now. You can close your laptop, walk around, look over your retirement plan one more time, call your financial planner, and return to it when you’re ready.

3. Faster Process

The process is faster and simpler. Buying an annuity online is designed to get you right to the point: owning an annuity.

No rambling conversations. No additional sales pitches. No “So where were we?” You buy an annuity. Period.

What Are the Risks?

Like any annuity purchase, you want to exercise some caution. You don’t want to lock into any product until you fully understand it. So, before you buy an annuity online, here are some things to consider.

1. You May Need an Expert

Some annuities are downright complicated, especially variable and fixed indexed annuities. For complex annuity contracts, you may need an insurance agent or financial professional to help you decipher what you’re buying.

2. You Have to Give Personal Information

Online Data theft is no joke. Before giving out valuable information online, make sure your annuity provider will keep it safe. And, to be extra safe, always buy your annuity through a trusted wifi network, like your home connection.

3. Your Online "Annuity Provider" May Not Actually Sell Annuities

Some websites advertise “online annuities” when, in reality, they’re quote-generators. They take your personal information and generate a list of annuity quotes from insurance companies in your area. While this might help you compare annuity rates and pricing, you’ll still have to buy the annuity the traditional way, usually in person or via telephone. What’s worse: Some of these quote-generating websites sell your personal information to insurance agents.

If you don’t like unsolicited phone calls and emails, stay away from these sites.

Which Annuities Are Safe to Buy Online?

The simplest annuity to buy directly online is a fixed annuity. Fixed annuities can be ridiculously simple: You hand over a lump sum to an insurer, and, in exchange, they give you a fixed interest rate for a guaranteed period of time. When your annuity contract is up, you turn on the income stream. You can either get fixed income payments for the rest of your life, or, if you like, you can get one lump-sum payment.

Everything you earn in a fixed annuity is protected against market volatility. So, unlike investing in mutual funds or directly in the stock market, you can predict how much you'll have at the end of your contract, which means more accurate retirement planning.

Which Annuities Are Better Bought With An Agent?

Unless you know your stuff, consult an agent (or financial advisor) before buying variable annuities and fixed index annuities.

Both of these annuity products are extremely complicated, have investing risks, and can come with high fees.

What Should You Look For in an Online Annuity Provider?

You’re about to give a lot of money to an insurance company, so when selecting one, you deserve to be picky. Before you make a choice, look for these five qualities.

1. Good Financial Standing

Remember: Unlike other financial products, annuities aren't FDIC-insured, nor does the federal government have to step in if your insurance company goes bankrupt. To protect your retirement income, make sure the insurance company you choose has good financial strength. How can you be sure of that?

Look at ratings from an independent credit rating agency like Standard & Poor, Moody’s, Fitch, and A.M. Best, to evaluate your insurance company’s financial situation.

2. Data Security

Your insurer should care about your personal information as much as you do. To protect your information, they should partner with reputable data security providers and continue to update their software as technology evolves.

In addition, they should always give you a clear explanation for why they need your personal information. If it’s not related to buying an annuity—like if they ask for your credit card number—that’s a huge red flag. Lastly, make sure the website is safe and that the insurance company uses encryption.

For complete peace of mind, call the customer service number to ask about data protection.

3. Transparency

Annuities can indeed be complicated, but in no way should your insurer use that complication to take advantage of you.

Your insurer should clearly spell out even the smallest details in your contract. For instance, you should know how your money will grow, what your income payments will look like, how much you’ll pay in fees, what to expect if you take early withdrawals, and what will happen if you pass away early.

4. Expert Guidance

An online buying process should be simple, but your insurance company should have licensed agents ready to answer your questions if you need help. These agents should be clear about which licenses they hold, they should answer your questions in plain English, and they should not try to upsell additional products.

5. Excellent Service

Lastly, make sure your insurance company will actually serve you. To get an idea of what their service looks like, read reviews on third-party review sites, or look for customer complaints on the Better Business Bureau (BBB).

Ready to Buy Your Annuity Online?

Great! We’d love to help you get started. At Canvas, we’re super excited to sell our fixed annuities directly online. We offer multi-year guaranteed annuities (read: ridiculously simple and secure) with competitive interest rates that you can purchase using qualified or non-qualified funds.

Choose between our Future Fund, which gives you high interest rates to grow your money faster, and our Flex Fund, which allows you to receive your initial premium back (less any withdrawals you’ve already taken) penalty-free whenever you want. And the best part?

You can buy these annuities in 10 minutes or less without talking on the phone or mailing in your documents (though we do have non-commissioned agents available if you need help).

To make the buying process secure and protect your personal information, we use only secure technology, such as LexisNexis, DocuSign, and Plaid. Ready to get started? See which product is right for you, and let’s get your annuity set up today.