Key Takeaways
- Illinois requires a 10-day free look period for annuities (20 days for persons age 60+)
- Illinois adopted the NAIC Suitability in Annuity Transactions Model Regulation
- Producers must have reasonable grounds to believe an annuity recommendation is suitable
- Illinois requires disclosure of surrender charges and penalties before purchase
- Annuity replacements require detailed comparison and documentation
Illinois Annuity Regulations
Illinois has adopted comprehensive annuity regulations to protect consumers from unsuitable sales and deceptive practices.
Free Look Period
Illinois provides a free look period for annuity contracts:
| Buyer Age | Free Look Period |
|---|---|
| Under 60 | 10 days |
| Age 60 and older | 20 days |
Key points:
- Applies to all annuity types (fixed, variable, indexed)
- Buyer can return for full premium refund
- No penalty for exercising free look
- Period begins when contract is delivered
Exam Tip: Illinois extends the annuity free look period to 20 days for persons age 60 and older. This is different from life insurance which uses age 65 as the threshold.
Suitability Requirements
Illinois adopted the NAIC Suitability in Annuity Transactions Model Regulation:
Producer Duties
Before recommending an annuity, the producer must:
- Make reasonable efforts to obtain customer information
- Analyze whether the recommendation is suitable
- Document the basis for the recommendation
- Disclose all material information about the product
Required Information
| Category | Information Required |
|---|---|
| Financial Status | Income, liquid assets, financial needs |
| Tax Status | Tax bracket, qualified vs. non-qualified funds |
| Investment Objectives | Goals, time horizon, risk tolerance |
| Existing Coverage | Current annuities and life insurance |
| Liquidity Needs | Expected need for funds |
Best Interest Standard
Illinois requires:
- Recommendations in the best interest of the consumer
- Material conflicts of interest must be disclosed
- Documentation of suitability analysis
Senior Protections
Illinois has enhanced protections for senior annuity purchasers:
Extended Free Look
For buyers age 60 or older:
- 20-day free look period (vs. 10 days for younger buyers)
- Allows time to consult with family or advisors
- Producer must inform senior of this right
Enhanced Disclosures
Seniors must receive:
- Clear explanation of surrender charges
- Comparison with existing contracts
- Written confirmation of suitability
Surrender Charge Disclosures
Illinois requires clear disclosure of surrender charges:
| Requirement | Details |
|---|---|
| Written Disclosure | Must explain all surrender charges |
| Timing | Before purchase |
| Format | Clear and understandable language |
| Duration | Length of surrender charge period |
Replacement Requirements
When replacing an existing annuity, producers must:
Documentation Required
- Comparison statement - Side-by-side comparison of old and new contract
- Replacement form - Signed acknowledgment of replacement
- Suitability analysis - Why replacement is appropriate
- Notice to existing insurer - Notification of pending replacement
Red Flags
IDOI scrutinizes replacements for:
- Short holding periods before replacement
- Surrender charges not fully explained
- New surrender charge period starting over
- Commission-motivated churning
How long is the free look period for an annuity sold to a 62-year-old in Illinois?
Which model regulation has Illinois adopted for annuity suitability requirements?