Annuity Suitability Training

Table of Contents

 

Adequate Communication Skills

6

Investment Vehicles

6

 

What exactly is an annuity?

6

The Test of Time

7

Finding the Right Products

8

How Annuities are Used

9

 

Safety of Investment

9

 

Funding Retirement

10

 

Structured Settlements

10

 

Beneficiary Designated Money

11

 

Probate Avoidance

11

Old Money; New Money

11

Annuity Participants

11

Types of Annuities

12

Categorizing Annuities

12

Benefit Payment

13

 

Immediate Annuities

13

 

Deferred Annuities

13

 

Split Annuities

14

Payment Methods

14

 

Single Premium Annuities

14

 

Flexible Premium Annuities

14

Annuity Type Based on Policyowner Risk

15

 

Variable Annuities

15

 

Fixed Annuities

16

 

Declared Rate Fixed Annuities

16

 

Indexed Fixed Annuities

16

 

Two-Tiered Annuities

17

Fixed Rate Annuities

18

Equity Indexed Annuities

20

Variable Annuities

23

 

Annual Expenses

24

 

Funding Variable Annuities

24

 

Variable Annuity Death Benefit

25

Contract Provisions Affect Consumers

25

Annuity Surrender Values and Penalties

25

Guaranteed Rates of Return

28

 

Important EIA Fact

29

Index Crediting

31

Participation Rates

32

Averaging

33

Caps

33

Spreads, Margins and Administrative Fees

34

Returns

34

Indexing Formulas

35

Annual Reset Indexing Method

36

High Water Mark Indexing Method

37

Point-to-Point Indexing Method

38

Multiple EIAs with Diversified Indexing Methods

39

Withdrawing Annuity Funds

39

Payout Options

40

 

Nonhuman Payees Under a Settlement Option

41

 

Lifetime Income Payout Option

41

 

Life Annuity, Period Certain Payout Option

42

 

Joint-and-Last-Survivor Payout Option

42

 

Required Distribution

43

Taxation

43

 

Qualified and Non-qualified Annuity Annuitization

44

 

ERISA and Tax Favored Retirement Plans

45

 

Using Annuities in Tax Favored Retirement Plans

45

 

IRS Requirements for Annuity Funding

46

 

Taxation of Qualified Annuity Distributions

46

Financially Sound Insurers

47

State Guaranty Associations

48

Suitability Standards

49

 

Determining Suitability

49

 

Sales Practices

51

 

Product Replacement

51

 

Deceptive Sales Practices Forbidden

52

 

Full Disclosure

52

 

Product Knowledge

52

 

Identifying Suitability Issues

52

It is Not a Liquidity Issue but Rather a Suitability Issue

54

A Comprehensive Financial Plan

55

Tax-Deferred Status

58

Tax-Deferral Exception

60

Exchanges

60

Annuity Gifts

60

Other Tax Issues

61

Annuities Are (Sometimes) Protected Assets

61

Probate

62

Sometimes an Annuity is a Bad Idea

63

 

Considering Applicant Age

63

 

Surrender Penalties

63

Grasping Fundamental Aspects of the Product

64

 

Basic Information Requirements

65

Terminology for Equity Indexed Annuity Products

66

General Contract Provisions

69

Entire Contract

70

Changes and/or Waivers

70

Misstatements

70

Required Reporting

71

State Law

71

Claims of Creditors

71

            Other Contract Items

71

Additional Payments

72

In Conclusion

73

 

United Insurance Educators, Inc.

8213 352nd Street East

Eatonville, Washington 98328-8638

(253) 846-1155

 

Email: mail@uiece.com

 

Website: www.uiece.com