United Heritage Flexible Premium Heritage Annuity Review

Product Policy

How does the Heritage Flexible Traditional Fixed Annuity policy work?

Any annuitant can invest in the United Heritage Flexible Premium Traditional Fixed Annuity by making an initial minimum premium contribution of $1,000. As a flexible premium annuity, it allows policyholders to make additional premium payments at any time, subject to the contract's terms and conditions. In return, they receive a guaranteed interest rate that is declared one year at a time and credited to their account. With its predictable interest crediting method and principal protection, this annuity is designed for individuals who prefer steady, tax-deferred growth without market-related risks.

Let’s have a look at the United Heritage Flexible Premium Traditional Fixed Annuity rate sheet (as of January 2025) to understand how the earnings are determined.

Below is a detailed breakdown of the key components of the rate table, which illustrates how interest is credited throughout the contract term:

First-Year Yield: This represents the interest rate credited during the first contract year. For example, the current first-year yield as of January 2025 is 2.65%, providing a boost to your annuity’s growth during the initial period.
7-Year Term Current Annual Yield: This shows the average annual yield for the current interest rate cycle over the 7-year term, currently set at 2.68%. This figure reflects how your account is expected to grow if the current base interest rate remains consistent.
7-Year Term Guaranteed Annual Yield: This is the guaranteed minimum average annual yield you will receive over the 7-year period, regardless of market fluctuations. As per the table, this rate is 2.53%, ensuring a minimum return on your investment.
Current Base Interest Rate: This represents the ongoing interest rate credited after the first year, currently 2.65%. This rate can fluctuate annually but will not fall below the guaranteed minimum interest rate.
Guaranteed Minimum Interest Rate: This is the lowest interest rate you can receive at any time during the contract, ensuring your principal and accrued interest are protected. The guaranteed minimum rate for this annuity is 2.50%.

Important Note: These rates have been updated as of the time of this article (January 2025). Since rates are subject to change, it is crucial to consult with your trusted financial advisor to stay updated on the latest rates and terms before making any investment decisions.

Example of How the United Heritage Flexible Premium Annuity Works

Let’s assume you make an initial premium contribution of $100,000 and keep your funds invested for the full 7-year period without making any withdrawals:

First-Year Growth: During the first year, your account will grow by 2.65%, increasing your balance to $102,650.
Subsequent Years: After the first year, the interest rate reverts to the base rate (2.65% as of now). Assuming this rate remains unchanged, your account will grow as follows:
End of Year 2: $102,650 * (1 + 2.65%) = $105,370
End of Year 3: $105,370 * (1 + 2.65%) = $108,162 (and so on for the remaining years).
Guaranteed Protection: Even if the base rate decreases during subsequent years, the annuity guarantees an average annual yield of at least 2.53% over the 7-year period.

Riders

The United Heritage Flexible Premium Traditional Fixed Annuity comes with two riders at no additional cost, providing policyholders with flexibility and support during critical life events.

Terminal Illness Waiver: After the first contract anniversary, if the contract owner is diagnosed with a terminal illness and is not expected to live more than 12 months, any applicable Market Value Adjustment (MVA) and surrender charges will be waived on withdrawals. The terminal illness must be diagnosed by a qualified physician after the contract’s issue date, and proof of the diagnosis must be provided to United Heritage Life Insurance Company.
Nursing Home Confinement Waiver: After the first contract anniversary, if the contract owner requires nursing home confinement, any applicable MVA and surrender charges will be waived on withdrawals. To qualify, the confinement must last at least 90 consecutive days or include no more than a 6-month break if spread over multiple periods. The confinement must be prescribed by a qualified physician as medically necessary, and proof must be provided to the company during confinement or within 90 days afterward.

Surrender/Early Withdrawal Charge

Starting from the second contract year, you are allowed a 10% free withdrawal of your contract value, excluding any non-vested premium bonuses, without incurring charges, fees, or penalties. Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal that is above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies, although certain charges and penalties may apply. Any amount withdrawn in excess of the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule for the United Heritage Flexible Premium Traditional Fixed Annuity.

Market Value Adjustments - In case you need to surrender your policy, a Market Value Adjustment (MVA) will be applied to the portion of the withdrawal or surrender that exceeds the free withdrawal amount during the withdrawal charge period.

Contract/Administrative Charge

The United Heritage Flexible Premium Traditional Fixed Annuity levies no annual contract or administrative fees.

Suitability of the United Heritage Flexible Premium Traditional Fixed Annuity

A traditional fixed annuity, like the United Heritage Flexible Premium Traditional Fixed Annuity, is often referred to as a "trust me" annuity. This is because, after the first year, the annuity’s future interest rates are at the discretion of the insurance company. While this may seem uncertain, it can be a suitable option if the issuing company has a strong history of treating policyholders fairly by offering competitive renewal rates.

When considering whether this product is right for you, it’s important to research the company’s renewal rate history. A renewal rate history table, if available, can provide insights into whether the company tends to maintain, increase, or lower the interest rates on previously issued contracts. Companies with a reputation for fair and consistent renewal rates are more likely to offer a good value over time.

One advantage of a traditional fixed annuity is that its base interest rate can adjust annually, which means that if market interest rates rise, your contract's interest rate could rise as well. In contrast, a multi-year guarantee annuity (MYGA) locks in your rate for the entire contract term, which can limit your ability to benefit from rising rates. However, in reality, not all traditional fixed annuities adjust their rates at the same pace as the broader market. Some companies may offer renewal rates that are just slightly above the guaranteed minimum, while others may offer more competitive rates.

The competitive annuity market plays a role in keeping insurance companies accountable. If the renewal rate for an existing contract is too low compared to new annuity products on the market, policyholders may choose to surrender their contracts and move their funds to higher-yielding alternatives—though early withdrawals may incur charges during the surrender period.

Is the United Heritage Flexible Premium Traditional Fixed Annuity Right for You?

This annuity may be appropriate if:

You are comfortable with an annually declared interest rate and trust the insurance company to provide competitive renewal rates.
You value tax-deferred growth and principal protection while maintaining some flexibility to benefit from potential rate increases.

However, if you prefer more predictability and do not want your interest rate to change during the contract term, a multi-year guarantee annuity (MYGA) may be a better option for you. Ultimately, the decision comes down to your financial goals, risk tolerance, and comfort with trusting the issuer’s renewal rate practices.

Before making a purchase, it’s always wise to consult a financial advisor and choose a reputable company with a proven history of offering fair renewal interest rates.

Traditional Fixed Annuities vs. Multi-Year Guaranteed Annuities (MYGAs)

When choosing a fixed annuity, understanding the differences between Traditional Fixed Annuities and Multi-Year Guaranteed Annuities (MYGAs) is crucial to making an informed decision that aligns with your financial goals. While both offer principal protection and tax-deferred growth, their interest rate structures differ significantly.

Interest Rate Structure
Traditional Fixed Annuities: The interest rate is declared one year at a time and may change annually at the discretion of the insurance company. After the first year, the company sets the interest rate for the following year, which could be higher, lower, or the same as the previous rate.
MYGAs: The interest rate is locked in for the entire term of the contract, which can range from 2 to 10 years. This provides a predictable, fixed return for the duration of the annuity.
Flexibility vs. Predictability
Traditional Fixed Annuities: These can provide some flexibility, as their rates may increase if market interest rates rise. However, this also introduces uncertainty, as there is no guarantee that the rate will rise significantly or at all.
MYGAs: MYGAs offer more predictability since the interest rate is fixed for the term. This can be an advantage in a low or volatile interest rate environment but may be a disadvantage if rates rise sharply during the term.
Renewal Rate Risks
Traditional Fixed Annuities: The risk lies in how the insurance company adjusts the renewal rate each year. Some companies have a track record of offering fair renewal rates, while others may only offer rates slightly above the guaranteed minimum. Reviewing the company’s renewal rate history can help mitigate this risk.
MYGAs: Renewal rate risk is not a factor during the contract term since the rate is locked in. However, when the term ends, you may need to reinvest your funds at current market rates, which could be lower than expected.
Suitability
Traditional Fixed Annuities: Suitable for individuals who prefer short-term flexibility and believe interest rates will rise. They work best when issued by a company with a history of fair renewal practices.
MYGAs: Ideal for those who value stability and want to lock in a competitive rate for a longer period. MYGAs are often chosen by conservative investors seeking a safe and predictable return over time.

Company Details

You must always keep in mind that, unlike CDs, annuities are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. An annuity's "guarantee" is only as strong as the insurance company that issues the annuity, so it is always important to assess the issuing company before buying an annuity.

United Heritage Life Insurance Company

United Heritage Life Insurance Company is a well-established insurer headquartered in Meridian, Idaho. Founded in 1934 as Grange Mutual Life Company, it initially provided affordable life insurance to Grange members in Washington and Idaho. Over the years, the company expanded its services and, in 1991, rebranded as United Heritage Mutual Life Insurance Company, later becoming United Heritage Life Insurance Company in 2001.

As the largest insurer headquartered in Idaho, United Heritage Life offers a comprehensive range of products, including life insurance, preneed funeral planning, final expense coverage, fixed annuities, and group insurance. These products are distributed through licensed independent agents across 49 states and the District of Columbia, demonstrating the company's extensive reach.

United Heritage Life Insurance Company’s financial strength is reflected in the following figures as of FY2023:

Total Assets: $726.9 million
Surplus: $81.9 million
Net Income: $4.6 million
Total Revenue: $164 million

Financial Strength and Ratings

United Heritage Financial Group (UHFG) and its subsidiaries have demonstrated a strong financial position, as evidenced by their ratings from various agencies and financial performance indicators.

A.M. Best Rating: A- (Excellent)
Kroll Bond Rating Agency (KBRA) Rating: A-

UHLIC's strong financial position is attributed to its balanced reserve mix, low-risk product profile, and consistent earnings history.

Conclusion

With the advancement in healthcare and technology, the average person today is living longer than ever. So, it’s very important to have a stream of income that can grow safely and steadily and have the ability to provide a guaranteed income during the retirement years. This not only helps you mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in your retirement.

The United Heritage Flexible Premium Traditional Fixed Annuity may offer principal protection, but when evaluating a fixed annuity, interest rates are the most important factor to consider. Unfortunately, both the first-year interest rate and potential renewal rates for this annuity are relatively low compared to other options in the market. Additionally, many traditional fixed annuities offer a bonus rate in the first year to enhance initial returns—an incentive lacking in this annuity. Since the interest rate is declared annually, future rates are at the discretion of the insurer and may not keep pace with market trends. Insurers often reduce renewal rates quickly during unfavorable market conditions and are slower to increase them when rates rise.

As of the time of writing, this product's rate structure makes it less attractive compared to other annuities that offer relatively higherl rates and first-year bonuses. Therefore, it may be prudent to consider alternative fixed annuities with stronger interest rate offerings and bonus incentives.

For those who value predictability and rate stability, a Multi-Year Guaranteed Annuity (MYGA), which locks in the interest rate for the entire term, may be a better option. As always, consult with your financial advisor and review the company’s renewal rate history and the latest interest rates before making a commitment.

We understand that choosing the right annuity can be a complex decision, influenced by a myriad of factors such as market conditions, individual financial goals, and evolving life circumstances. To better serve you in this critical decision-making process, we regularly conduct in-depth reviews of various annuity products, examining features, costs, and potential benefits. Dive deeper into our extensive reviews.