Key Takeaways
- Georgia requires clear disclosure of all surrender charges before an annuity sale
- Producers must explain the complete surrender charge schedule
- Free withdrawal provisions must be clearly disclosed
- Georgia follows NAIC model disclosure requirements
- Replacement transactions require detailed comparison disclosures
Georgia Annuity Surrender Charges and Disclosures
Georgia requires clear disclosure of annuity surrender charges to protect consumers.
Disclosure Requirements
What Must Be Disclosed
Before completing a sale:
| Disclosure Item | Requirement |
|---|---|
| Surrender Schedule | Complete schedule |
| Declining Schedule | How charges decrease |
| Free Withdrawal | Amount without penalty |
| Penalty-Free Events | Death, disability, etc. |
| MVA Impact | Market Value Adjustments |
Timing of Disclosures
- Before application is signed
- In writing
- In clear language
- With time for questions
Common Surrender Structures
Typical Declining Schedule
| Year | Sample Charge |
|---|---|
| 1 | 7% |
| 2 | 6% |
| 3 | 5% |
| 4 | 4% |
| 5 | 3% |
| 6 | 2% |
| 7 | 1% |
| 8+ | 0% |
Free Withdrawal Provisions
Most annuities allow:
- 10% of contract value annually
- May accumulate if not used
- First-year restrictions may apply
- RMDs often penalty-free
Exam Tip: Always disclose the free withdrawal percentage AND any restrictions.
Market Value Adjustments
Some annuities include MVAs:
How MVAs Work
| Scenario | Effect |
|---|---|
| Interest rates rise | MVA may reduce value |
| Interest rates fall | MVA may increase value |
| Held to maturity | No MVA applies |
MVA Disclosure Requirements
- Explain MVA can increase OR decrease value
- Provide examples of impact
- Do not minimize negative risk
- Disclose in writing
Penalty-Free Events
Georgia requires disclosure of penalty-free events:
Common Events
| Event | Description |
|---|---|
| Death | Full value to beneficiary |
| Terminal Illness | Waiver if diagnosed |
| Nursing Home | Waiver after confinement |
| Disability | Waiver for disability |
| Annuitization | Waiver if annuitized |
Required Disclosures
For each event:
- Triggering conditions
- Required documentation
- Time limits
- Any exceptions
Replacement Disclosures
When replacing annuities:
Comparison Requirements
| Item | Old Contract | New Contract |
|---|---|---|
| Surrender period | Remaining years | Total years |
| Surrender charge | Current % | Starting % |
| Free withdrawal | Available | New provisions |
Consumer Acknowledgment
Consumer must sign acknowledging:
- New surrender period
- Old charges may apply
- Lost benefits
- Reason for replacement
Georgia Illustration Requirements
Georgia follows NAIC model for illustrations:
Required Elements
| Element | Requirement |
|---|---|
| Guaranteed Values | Must show |
| Non-Guaranteed | Clearly labeled |
| Surrender Values | Year-by-year |
| Death Benefits | If applicable |
Illustration Delivery
- Before or with application
- Signed by consumer
- Copy retained
Best Practices
Disclosure Best Practices
| Practice | Benefit |
|---|---|
| Use visual aids | Helps understanding |
| Show examples | Makes concrete |
| Document discussion | Protects producer |
| Allow questions | Ensures understanding |
What to Emphasize
- Total surrender period
- First-year and declining charges
- Free withdrawal amount
- Penalty-free events
- Impact of early withdrawal
Regulatory Scrutiny
Commissioner reviews for:
Excessive Charges
- Charges above market average
- Charges that don't decline
- Hidden structures
Inappropriate Products
- Surrender periods past life expectancy
- Limited liquidity for those needing access
- Complex products for unsophisticated buyers
Exam Tip: Georgia requires surrender charge disclosures BEFORE the sale. Consumers need time to understand.
When must surrender charge disclosures be provided in Georgia?
What is a Market Value Adjustment (MVA)?
What percentage free withdrawal do most annuities allow?
Which is a penalty-free surrender event?
What must be disclosed when replacing an annuity?