Key Takeaways
- Pennsylvania requires a 10-day free look period for annuity contracts (30 days for seniors 65+)
- Pennsylvania follows the NAIC Suitability in Annuity Transactions Model Regulation
- Producers must make reasonable efforts to obtain customer information before recommending annuities
- Annuity replacements require detailed comparison and disclosure to the consumer
- Pennsylvania requires annuity illustrations to be clear and not misleading
Pennsylvania Annuity Regulations
Pennsylvania has adopted comprehensive annuity regulations to protect consumers from unsuitable sales and deceptive practices.
Free Look Period
Pennsylvania provides free look periods for annuity contracts:
| Buyer Age | Free Look Period |
|---|---|
| Under 65 | 10 days |
| 65 and older | 30 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: Senior protection with the 30-day free look for those 65+ is a frequently tested Pennsylvania-specific rule.
Suitability Requirements
Pennsylvania follows 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
Pennsylvania has adopted enhanced standards requiring:
- Recommendations in the best interest of the consumer
- Compensation cannot be primary motivator
- Material conflicts must be disclosed
- Enhanced documentation requirements
Illustration Requirements
Pennsylvania requires annuity illustrations to be:
Illustration Standards
| Requirement | Description |
|---|---|
| Clear Language | Must be understandable to consumer |
| Not Misleading | Cannot exaggerate benefits |
| Guaranteed vs. Non-Guaranteed | Must clearly distinguish |
| Assumptions Disclosed | Interest rate and other assumptions |
| Signed Acknowledgment | Consumer must sign receipt |
Variable Annuity Rules
For variable annuities:
- Must provide prospectus
- Must explain investment risks
- Subaccount performance disclosures
- Fee disclosure requirements
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
Consumer Protections
| Protection | Requirement |
|---|---|
| Disclosure of Surrender Charges | Existing and new contract charges |
| Lost Benefits | What benefits are being given up |
| New Contestability Period | Disclosure that new period begins |
| Tax Consequences | Potential tax implications |
Senior-Specific Protections
Pennsylvania provides additional protections for senior annuity buyers:
- 30-day free look period (vs. 10 days for under 65)
- Enhanced suitability requirements
- Clear disclosure of surrender periods
- Special attention to liquidity needs
What is the free look period for an annuity purchased by a 70-year-old in Pennsylvania?
What must a Pennsylvania producer do before recommending an annuity?