Class Action Launched Against EquiTrust Life Insurance Company

Two Arizona senior citizens filed a proposed class-action lawsuit against EquitTrust Life Insurance Company, claiming the Iowa-based financial company duped consumers into purchasing financial products through deceptive sales practices, among other charges.

According to the lawsuit, EquiTrust designed a scheme that defrauds policyholders, especially the elderly -- a group in need of retirement saving and spending vehicles without onerous surrender charges and lengthy maturation periods -- to create large product spreads in order to pay its agents oversized commissions, to lure prospects with illusory bonuses, and to earn a large profit margin.

To help protect this group, 47 states have adopted a consumer protection statute -- the Standard Nonforfeiture Law for Individual Deferred Annuities (SNFLIDA) -- that limits surrender penalties through a prospective test. This test generally protects those over the age of 60 from individual deferred annuity products that have optional maturity dates and surrender charges that exceed 10 percent of the policyholder's premium.

The suit claims EquiTrust's surrender charges are often 20 percent, twice the permitted amount. The SNFLIDA test also prohibits issuing such annuities to the elderly that have surrender penalty periods in excess of 10 years. EquiTrust's annuities often have surrender penalty periods of up to 14 years.

The lawsuit claims EquiTrust builds into its annuities package a maturity that occurs after the policyholders' 105th birthday. As the fine print is built into plaintiff's contracts with EquiTrust, these dates cannot be changed. This conniving tactic protects the insurance company from risk while significantly damaging the financial security of the policyholder, the suit claims.

Annuities receive a beneficial tax treatment under U.S. Tax Code in that the growth on principal within the annuity accumulates on a tax-deferred basis until the funds are withdrawn. This is a big incentive for prospective purchasers and one EquiTrust offsets by its product spread in its indexed annuities, plaintiffs claim.

The lawsuit claims the "scheme was devised and intentionally crafted to ensure that plaintiffs and class members would purchase indexed annuities and not receive full benefits from the annuities or be subject to exorbitant surrender charges."

Plaintiffs claim the class has been forced to pay hundreds of millions of dollars in premiums and surrender charges for annuity products that, by design, could not perform as advertised.

The lawsuit names several counts against EquiTrust including violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), unjust enrichment and common law civil conspiracy.

The suit seeks to represent anyone who purchased an indexed annuity product from EquiTrust from 2004 until present.

EquiTrust Life Insurance Company Class Action Legal Help

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Last updated January 14 2009

Reader Comments

Posted by
Marvallene Lapp
June 1,2016 will be the third year that I placed my IRA into EquiTrust hands! I have regrets about this move as The agent talked me into signing the contract before reading anything! He assured me it was great! My husband had died 7 mts. Prior and I wasn't in a good state of mind! When I finally received the full contract I tried to understand it! It took me more than a year to grasp what I had signed! They had me wrapped up into a 15 year waiting period before I would be able to get all the money out penalty free. I thought they were only taking .005% from the earnings but it is charged on the entire account each anniversary! That is a lot! The only positive to the account is that they gave me 6%. To start with and the next 3 years I would receive 2%. It has an "Income for Life" feature that accumulates for 9 years. I am 66 now and if I start taking money I will lose the "Income for Life" increases each year as I have only been in this since 2013. I wish I had never done this!

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