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2025 Annuity 8-Hour Training |
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Table of Contents |
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Chapter 1 - Annuity Historical Development |
1 |
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Annuity Evolvement |
1 |
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CA Attachment 1 – History of Legislation |
1 |
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Year 2024 |
2 |
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Year 2011 |
4 |
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Year 2003 |
5 |
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SB 618, (Scott, Chapter 546), Insurance: unfair acts: licenses. |
5 |
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AB 284 (Chavez, Chapter 381), Deferred annuities: nonforfeiture |
6 |
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Year 2002 |
7 |
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AB 2984 (Committee on Insurance, Chapter 203), Insurance: depository institutions: production agencies: surplus line brokers: reinsurance intermediaries. |
7 |
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Year 2000 |
7 |
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SB 423 (Johnston, Chapter 694), Life insurance: guaranteed living benefits |
7 |
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AB 2107 (Scott, Chapter 442) Elder Abuse |
8 |
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Year 1998 |
8 |
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SB 1718 (Calderon, Chapter 386), Life insurance |
8 |
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Year 1997 |
9 |
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SB 203 (Lewis, Chapter 28), Insurers: mortality tables. |
9 |
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Year 1994 |
9 |
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SB 1505 (Calderon, Chapter 984), Life insurance and annuity contracts: senior citizen policies and annuities |
9 |
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AB 1667 (Hoge, Chapter 6), California Insurance Guarantee Association |
10 |
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Year 1993 |
11 |
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SB 1065 (Mello, Chapter 516), Life insurance |
11 |
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Market Overview |
11 |
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Chapter 2 - Primary Uses of Annuities |
13 |
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Using Annuities Effectively |
14 |
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Safety of Investment, Funding Retirement, Structured Settlements |
14 |
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Beneficiary Designated Money, Probate Avoidance, Paying LTC Costs |
15 |
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Longevity Insurance, Annuity Ladders |
16 |
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Lifetime ladders |
18 |
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Chapter 3 - Types & Classifications of Annuities |
20 |
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Defined: Immediate, Deferred |
20 |
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The Difference Between Immediate & Deferred |
20 |
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Annuity Type According to How & When Premium are Paid |
21 |
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Client Relationship Based on Annuity Types |
21 |
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Single Premium Annuities |
21 |
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Flexible Premium Annuities |
21 |
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Characteristics of Single & Flexible Premiums |
21 |
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Annuity Types Based on Investment Options: Variable, Fixed & Indexed |
22 |
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Variable Annuities |
22 |
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Fixed Annuities |
23 |
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Indexed Annuities (EIA) |
24 |
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Distinguishing Between Annuity Types |
26 |
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Relationship Between Annuity Type & the Client |
26 |
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Chapter 4 - Annuity Participants |
27 |
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Identifying the Parties to an Annuity |
27 |
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Annuity Owner’s Rights & Obligations |
27 |
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Annuitant-Driven Policies |
28 |
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Owner-Driven Policies |
28 |
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Rights & Obligations of Annuitants |
28 |
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Annuitant Eligibility |
28 |
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Rights & Obligations of the Insurer |
29 |
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CIC 10127.10 |
29 |
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CIC 10127.11 |
32 |
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CIC 10127.12 |
32 |
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CIC 10127.13 |
33 |
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CIC 10509.6 |
33 |
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The Insurer’s Role |
34 |
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Non-Qualified Annuities |
35 |
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Insurer Obligations Regarding IRAs, 403(b), & Qualified Retirement Plans |
35 |
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Rating Services |
35 |
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Advertising Responsibilities Insurance Code Section 787 |
37 |
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Refund Policy: California Insurance Code 10127.9 |
38 |
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Replacement and “Free Look” Periods |
39 |
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Beneficiary Rights & Options |
40 |
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SB 483 Medi-Cal Home and Facility Care Rules |
41 |
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Settlement Options for Beneficiaries |
42 |
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Chapter 5 - Annuity Contract Provisions |
44 |
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Annuity Types |
44 |
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Contract Provisions Affect Consumers |
45 |
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Issue Ages Under 10112 |
45 |
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California Insurance Code Section 10540 |
47 |
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Market Value Adjustment |
47 |
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Impact of Surrender Charges on Principal |
47 |
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Surrender Charge Waivers |
48 |
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Nursing Home & Terminal Illness Waiver |
48 |
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Unemployment Waiver |
48 |
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Disability Waiver |
48 |
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Death Benefit Waiver |
49 |
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Charges & Fees |
49 |
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Mortality & Expense Risk Charge |
49 |
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Administrative Fees |
49 |
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Underlying Fund Expenses |
50 |
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Annuity Withdrawal Options |
50 |
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Single Life, Joint-and-Last-Survivor |
50 |
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Lifetime-With-Period Certain, Cash-Refund |
51 |
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Common Annuity Contract Provisions |
52 |
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Annuity Income Distributions |
52 |
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Split Annuities |
52 |
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Annuitization |
53 |
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Flexible Annuitization Options |
55 |
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Death Benefits |
55 |
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Lump Sum Distributions |
56 |
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Low Interest Rates & Annuities |
56 |
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Stepped-Up Death Benefits |
56 |
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Guaranteed Minimum Income Benefits |
57 |
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Long-Term Care Benefits |
57 |
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Interest Rate Strategies for Annuities |
58 |
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Company Strategies |
58 |
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Annual & Multi-Year |
58 |
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Minimum Guaranteed Interest Rates |
59 |
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Incentive Bonus Rates |
59 |
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Portfolio Rates |
60 |
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Old Money – New Money |
60 |
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Minimum Guaranteed Interest Rates 10168.5 |
60 |
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Impacts of a Low-Interest Rate Market |
61 |
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Variable Annuities |
61 |
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Licensing & Prospectus |
62 |
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FINRA |
63 |
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Variable Annuity Typical Contract Provisions |
64 |
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Variable Annuity Death Benefit Guarantees 10168.4 |
64 |
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Variable Annuity Options |
65 |
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Living Benefit Guarantees |
66 |
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General Accounts |
67 |
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Separate Accounts (Subaccounts) |
67 |
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Variable Annuity Charges & Fees |
67 |
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Fixed-Rate Annuities |
67 |
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Adding Money |
68 |
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Guaranteed Future Income |
68 |
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Equity or Debt |
68 |
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Annuity Earnings |
69 |
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Dollar-Cost Averaging (DCA) |
70 |
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Equity Indexed Annuities (EIA) |
70 |
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Terminology for Equity-Indexed Annuities |
71 |
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Probate Avoidance |
73 |
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Impact of Premature Surrender Charges |
73 |
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Two-Tier Annuity Concepts |
73 |
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Index Annuity Charges & Fees |
74 |
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Index Credit Periods & Methods |
74 |
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Policy Riders |
74 |
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Life Insurance Riders |
74 |
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Long-Term Care (LTC) Riders |
75 |
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Skilled Nursing Facility Rider |
76 |
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Hospice Rider |
76 |
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Insurance Riders Might be Anything |
77 |
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Cost of Riders |
77 |
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Terms of Riders |
77 |
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Riders are Really Just Loan Provisions |
77 |
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Chapter 6 - Tax Qualifications |
78 |
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Tax Qualified Versus Non-Tax Qualified |
78 |
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Defined Benefit & Defined Contribution Plans |
78 |
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Individual Retirement Accounts (IRA) & Roth IRAs |
79 |
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Tax Sheltered Annuities (TSA) |
81 |
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401(k) Plans |
82 |
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Simplified Employee Pension Plan (SEP) |
84 |
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Annuities & Retirement Planning |
84 |
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Chapter 7 – Taxation |
86 |
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Premium Payments |
86 |
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Cash Value Accrual (10168.2) |
87 |
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CIC Section 10168.25 |
87 |
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Partial Withdrawals |
89 |
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Annuity Loans and Assignments |
89 |
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1035 Exchanges |
90 |
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Annuity Gifting |
91 |
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Selling an Annuity to Another Person |
92 |
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Death of the Annuity Owner or the Annuitant |
92 |
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Ordinary Income Tax Adjustment |
94 |
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Ordinary Income Tax Rates Upon Withdrawal |
94 |
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Exclusion Ratio & Expected Return |
95 |
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Tax Deferral Compounding |
96 |
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Annuity Tax Effect on Beneficiary Estates |
97 |
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California Attachment II (as provided by CA) |
98 |
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Life Agent’s Duties |
101 |
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Required Notice Before Meeting in Senior’s Homes |
101 |
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Elder Abuse |
102 |
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BILL NUMBER: AB 2107 CHAPTERED |
103 |
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Annuity Advantages |
110 |
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Risk Versus Safety |
110 |
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Taxable, Tax Deferred or Tax Free |
111 |
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Annuity Disadvantages |
112 |
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Surrender Charges can be Both an Advantage & Disadvantage |
114 |
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Income Distribution |
115 |
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Annuitizing before Age 60or After Age 60 |
116 |
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Investment Comparisons |
117 |
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Chapter 8 – Sales Practices |
119 |
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Required Education, CIC 1749.8 |
119 |
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CIC 10509.915 |
120 |
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CIC 10509.9205 – Training for Producers |
121 |
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CIC 1725.5 |
122 |
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CIC 10509.2 |
124 |
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CIC 10509.9 |
124 |
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CIC 10509.9203 |
125 |
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CIC 10509.9204 – Best Interest (effective1/1/2025) |
127 |
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Duties of Insurers & Producers |
127 |
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Best Interest Obligation |
127 |
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Care Obligation |
128 |
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Disclosure Obligation |
129 |
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Conflict of Interest Obligation |
131 |
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Documentation Obligation |
131 |
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Application of the Best Interest Obligation |
131 |
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CIC 1725.5 – Appropriate Advertising |
136 |
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Defining Advertisements |
137 |
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CIC 787 |
137 |
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Rights & Obligations |
138 |
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Treatment under Medi-Cal must provide the following disclosure |
139 |
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Policy Replacement CIC 10509.8 |
141 |
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Notice Regarding Replacement |
143 |
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Replacement Recommendations and Requirements CIC 10509.914 |
143 |
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Policy Conservation |
145 |
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CIC 1726 – Internet Advertisements |
145 |
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CIC 787 – Lead Advertising |
146 |
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CIC 789.9 - Prohibited Sales Practices |
147 |
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CIC 789.10 - In-Home Solicitations |
148 |
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CIC 1724 - Sharing Commissions |
149 |
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Cause for Suspension |
150 |
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Sharing Commissions with Attorneys |
151 |
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Unnecessary Contract Replacement |
151 |
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Bait and Switch Interview Tactics, Example of Pretext Interview |
153 |
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California Attachment III (as provided by CA) |
155 |
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Determining Annuity Suitability |
163 |
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Establishing Current Financial Status |
163 |
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Maintaining Liquid Emergency Funds |
164 |
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Investor Age Matters, Income |
165 |
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Current Tax Status, LTC Needs |
166 |
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Investment Objectives, Identifying Suitability Issues |
166 |
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Recordkeeping Requirements (1759.3) |
167 |
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Senior Citizen Refund Policy |
168 |
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Thirty-Day Free Look Period |
171 |
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Chapter 9 – Medi-Cal: Home and Facility Care |
172 |
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CIC 14006.15(c) – Home Equity Limits |
172 |
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Hardship Exemption |
173 |
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CIC 14006.41(b) – Requirements Related to Annuities |
175 |
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Annuity’s Effects on Medi-Cal Qualifications |
175 |
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Look Back Period |
176 |
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Chapter 10 – The Senion Market |
177 |
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CIC 785 – Honesty, Good Faith & Fair Dealing |
177 |
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Market Volatility, Risk Tolerance and the Senior Investor |
178 |
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Allocations in Retirement |
179 |
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Risk Tolerance |
180 |
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Conservative, Moderately Conservative |
181 |
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Moderate, Moderately Aggressive |
181 |
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Aggressive |
181 |
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Pre-Retirement and Post-Retirement Planning |
181 |
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Social Security Benefits |
183 |
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SS Survivor’s Benefits, SS Disability Benefits |
184 |
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Retirement Plan Distributions |
184 |
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Investing Retirement Assets, Insurance Concerns |
185 |
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Long-Term Care Insurance |
186 |
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Estate Planning (creating a will) |
186 |
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Selling to the Senior Market |
187 |
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Power of Attorney |
187 |
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Product Complexity |
188 |
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California Civil Codes § 38 and 39 |
188 |
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CIC 10127.13 – Surrender Charges for Senior Citizens |
189 |
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Suitability for the Senior Market |
189 |
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Chapter 11 – Record Keeping |
190 |
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CIC 10509.9204 |
190 |
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Duties of Insurers & Producers |
190 |
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Best Interest Obligations |
190 |
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Care Obligation |
190 |
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Disclosure Obligation |
192 |
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Documentation Obligation |
194 |
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Application of the Best Interest Obligation |
194 |
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Supervision System |
194 |
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Prohibited Practices |
196 |
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Safe Harbor |
197 |
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CIC 10509.9207 – Retention of Records |
198 |
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Chapter 12 – Penalties |
199 |
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Violations of the CIC – 782, 783, 789.3 |
199 |
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1668 |
200 |
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1668.1 |
201 |
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1725.5 |
202 |
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1738 |
203 |
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1739, 10509.9, 10509.9206 |
204 |
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Compliance; penalties |
204 |
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United Insurance Educators, Inc.
PO Box 1030
Eatonville, WA 98328
(253) 846-1155