Key Takeaways
- North Carolina requires a 10-day free look period for annuity contracts (30 days for replacements)
- North Carolina follows the NAIC Suitability in Annuity Transactions Model Regulation
- Producers must gather complete financial information before recommending annuities
- North Carolina adopted the Best Interest standard for annuity recommendations
- Annuity replacements require detailed comparison and disclosure to the consumer
North Carolina Annuity Regulations
North Carolina has adopted comprehensive annuity regulations to protect consumers from unsuitable sales and deceptive practices.
Free Look Period
North Carolina provides a free look period for annuity contracts:
| Annuity Type | Free Look Period |
|---|---|
| Standard Annuity | 10 days |
| Replacement Annuity | 30 days |
| Senior Buyers (65+) | 30 days |
- Buyer can return for full premium refund
- No penalty for exercising free look
- Period begins when contract is delivered
Suitability Requirements
North Carolina 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 |
| Age and Retirement Status | Current and expected retirement age |
Best Interest Standard
North Carolina requires:
- Recommendations in the best interest of the consumer
- Compensation cannot be primary motivator
- Material conflicts must be disclosed
- Enhanced documentation requirements
Senior-Specific Protections
North Carolina has special rules for annuity sales to seniors:
Enhanced Disclosures for Seniors
For buyers age 65 or older:
- 30-day free look period (instead of 10 days)
- Clear explanation of surrender charges
- Comparison with existing contracts
- Prominent disclosure of liquidity limitations
Suitability for Seniors
Extra care must be taken when recommending annuities to seniors:
- Consider proximity to retirement
- Evaluate need for liquidity
- Assess impact of surrender periods
- Ensure product matches needs
Exam Tip: Seniors 65 and older get a 30-day free look period for annuities in North Carolina.
Surrender Charge Disclosures
North Carolina requires clear surrender charge disclosures:
| Requirement | Description |
|---|---|
| Written Disclosure | Must clearly explain surrender schedule |
| Prominent Display | Surrender charges must be easy to find |
| Free Withdrawal | Must disclose any penalty-free access |
| Duration | Length of surrender period must be clear |
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
- Surrender charge disclosure - Costs of surrendering existing contract
- New surrender period - Disclosure that new period begins
Red Flags
NCDOI scrutinizes replacements for:
- Short holding periods before replacement
- Surrender charges not fully explained
- New surrender charge period starting over
- Commission-motivated churning
What is the free look period for annuity contracts sold to seniors age 65 and older in North Carolina?
Under North Carolina suitability requirements, which factor must a producer consider before recommending an annuity?