Key Takeaways
- Michigan requires a 10-day free look period for annuity contracts (30 days for seniors 65+)
- Michigan follows the NAIC Suitability in Annuity Transactions Model Regulation
- Best interest standard requires recommendations that put consumer interests first
- Annuity replacements require detailed comparison of existing and proposed contracts
- Surrender charges must be clearly disclosed and explained to purchasers
Michigan Annuity Regulations
Michigan has adopted comprehensive annuity regulations to protect consumers from unsuitable sales and deceptive practices.
Free Look Period
Michigan provides free look periods for annuity contracts:
| Purchaser Age | Free Look Period |
|---|---|
| Under 65 | 10 days |
| Age 65 and older | 30 days |
- 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: The 30-day free look for seniors applies to both life insurance and annuities in Michigan.
Suitability Requirements
Michigan 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
Michigan requires:
- Recommendations in the best interest of the consumer
- Producer compensation cannot be primary motivator
- Material conflicts must be disclosed
- Enhanced documentation requirements
Senior-Specific Protections
Michigan provides additional protections for senior annuity purchasers:
Extended Free Look
- 30-day free look period for buyers age 65 and older
- Applies to all annuity types
- Cannot be waived by the purchaser
Enhanced Disclosures
Seniors must receive:
- Clear explanation of surrender charges
- Comparison with existing contracts if replacement
- Disclosure of compensation arrangements
- Written confirmation of suitability
Surrender Charge Disclosures
Michigan requires clear disclosure of surrender charges:
| Disclosure | Requirement |
|---|---|
| Written Schedule | Complete surrender charge schedule |
| Duration | How long charges apply |
| Free Withdrawal | Any penalty-free withdrawal provisions |
| Market Value Adjustment | If applicable |
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
Considerations for Replacement
Producers must consider and disclose:
- Surrender charges on existing contract
- New surrender charge period beginning
- Loss of benefits or features
- Tax consequences
- Whether replacement is in client's best interest
Red Flags
DIFS scrutinizes replacements for:
- Short holding periods before replacement
- Surrender charges not fully explained
- Commission-motivated churning
- Pattern of replacements
What is the free look period for annuities sold to Michigan seniors age 65 and older?
What standard does Michigan apply to annuity recommendations?