Annuity Suitability Training

Table of Contents

 

Adequate Communication Skills

1

Investment Vehicles

1

 

What exactly is an annuity?

1

The Test of Time

2

Finding the Right Products

3

How Annuities are Used

4

 

Safety of Investment

4

 

Funding Retirement

5

 

Structured Settlements

5

 

Beneficiary Designated Money

6

 

Probate Avoidance

6

Old Money; New Money

6

Annuity Participants

6

Important Terms

7

Types of Annuities

9

Categorizing Annuities

9

Benefit Payment

10

 

Immediate Annuities

10

 

Deferred Annuities

10

 

Split Annuities

10

Payment Methods

11

 

Single Premium Annuities

11

 

Flexible Premium Annuities

11

Annuity Type Based on Policyowner Risk

12

 

Variable Annuities

12

 

Fixed Annuities

13

 

Declared Rate Fixed Annuities

13

 

Indexed Fixed Annuities

13

 

Two-Tiered Annuities

14

Fixed Rate Annuities

15

Equity Indexed Annuities

17

Variable Annuities

19

 

Annual Expenses

20

 

Funding Variable Annuities

21

 

Variable Annuity Death Benefit

21

Life & Annuity Insurance Policy Provisions Affect Consumers

22

Annuity Surrender Values & Penalties

22

Guaranteed Rates of Return

25

 

Important EIA Fact

26

Index Crediting

28

Participation Rates

29

Averaging

30

Caps

30

Spreads, Margins and Administrative Fees

31

Returns

31

Indexing Formulas

32

Annual Reset Indexing Method

33

High Water Mark Indexing Method

34

Point-to-Point Indexing Method

35

Multiple EIAs with Diversified Indexing Methods

35

Withdrawing Annuity Funds

36

Payout Options

36

 

Nonhuman Payees Under a Settlement Option

38

 

Lifetime Income Payout Option

38

 

Life Annuity, Period Certain Payout Option

39

 

Joint-and-Last-Survivor Payout Option

39

 

Required Distribution

40

Taxation

40

 

Qualified and Non-qualified Annuity Annuitization

40

 

ERISA and Tax Favored Retirement Plans

42

 

Using Annuities in Tax Favored Retirement Plans

42

 

IRS Requirements for Annuity Funding

43

 

Taxation of Qualified Annuity Distributions

43

Financially Sound Insurers

44

State Guaranty Associations

45

Suitability Standards

46

 

When Consumer Information is Withheld

46

 

Policy Affordability Today and Tomorrow

47

 

Determining Suitability

47

 

Sales Practices & Recommendations as Part of a Financial Plan

48

 

Product Replacement

49

 

Deceptive Sales Practices Forbidden

49

 

Insurers Cannot Issue Unsuitable Products

49

 

Full Disclosure

50

 

Product Knowledge

50

 

Identifying Suitability Issues

50

It is Not a Liquidity Issue but Rather a Suitability Issue

52

A Comprehensive Financial Plan

53

Tax-Deferred Status

57

Tax-Deferral Exception

59

Exchanges

59

Annuity Gifts

59

Other Tax Issues

59

Annuities Are (Sometimes) Protected Assets

60

Probate

61

Sometimes an Annuity is a Bad Idea

61

 

Considering Applicant Age

62

 

Surrender Penalties

62

Grasping Fundamental Aspects of the Product

63

 

Basic Information Requirements

64

Terminology for Equity Indexed Annuity Products

65

General Contract Provisions

68

Entire Contract

68

Changes and/or Waivers

68

Misstatements

69

Required Reporting

69

Claims of Creditors

70

            Other Contract Items

70

Additional Payments

70

In Conclusion

71

 

United Insurance Educators, Inc.

8213 352nd Street East

Eatonville, Washington 98328-8638

(253) 846-1155

 

Email: mail@uiece.com