Key Takeaways
- Texas requires delivery of the annuity Buyer's Guide before or at application
- All fees, charges, and limitations must be disclosed before purchase
- The free look period for annuities is 10 days (20 days for seniors age 60+)
- Guaranteed and non-guaranteed elements must be clearly distinguished
- Replacement transactions require comprehensive comparison disclosures
Texas Annuity Disclosure Requirements
Texas requires comprehensive disclosures to ensure consumers understand annuity products before purchase.
Buyer's Guide Requirement
Delivery Requirements
| Timing | Requirement |
|---|---|
| Standard Sale | At or before application |
| Replacement | Before application accepted |
| Direct Response | With policy delivery |
Buyer's Guide Contents
The NAIC Annuity Buyer's Guide explains:
- How annuities work
- Types of annuities
- Questions to ask before buying
- Fees and charges overview
- Surrender charge information
Fee and Charge Disclosures
Required Written Disclosures
| Fee Type | Must Disclose |
|---|---|
| Surrender Charges | Complete schedule and duration |
| Administrative Fees | Annual and periodic charges |
| M&E Charges | Mortality and expense for variable |
| Investment Fees | Subaccount expenses |
| Rider Charges | Optional benefit costs |
Surrender Charge Information
Producers must clearly explain:
- How surrender charges work
- Complete schedule of charges
- Duration of surrender period
- Free withdrawal allowances
- Waiver conditions
Exam Tip: Texas emphasizes clear surrender charge disclosure. Inadequate disclosure is a serious violation.
Free Look Period
Texas provides consumer protection through free look periods:
Standard Free Look
| Consumer Age | Free Look Period |
|---|---|
| Under 60 | 10 days |
| 60 and older | 20 days |
Free Look Rights
During the free look period:
- Consumer may return annuity for full refund
- No questions asked
- No surrender charges apply
- Period begins upon delivery
Guaranteed vs. Non-Guaranteed Elements
Illustration Requirements
All annuity illustrations must clearly identify:
| Element Type | Examples |
|---|---|
| Guaranteed | Minimum interest rate, minimum death benefit |
| Non-Guaranteed | Current crediting rate, projected values |
| Assumed | Hypothetical future projections |
Labeling Requirements
- Guaranteed elements clearly labeled
- Non-guaranteed elements identified as such
- Assumptions stated for projections
- Current vs. guaranteed rates distinguished
Replacement Disclosures
Additional Requirements for Replacements
| Disclosure Item | Requirement |
|---|---|
| Existing Policy | Current values and benefits |
| New Policy | Side-by-side comparison |
| Surrender Charges | Charges on existing contract |
| Tax Impact | Potential tax consequences |
| New Surrender Period | Duration and schedule |
Replacement Notice
The replacement notice must:
- Be signed by consumer
- Acknowledge replacement is occurring
- Compare key features
- Explain costs of replacement
Senior Consumer Protections
Enhanced Protections for Age 60+
| Protection | Requirement |
|---|---|
| Free Look | Extended to 20 days |
| Suitability | Enhanced scrutiny |
| Documentation | Detailed records |
| Time Horizon | Careful evaluation |
Special Considerations
When selling to seniors, producers must:
- Assess liquidity needs carefully
- Consider shorter time horizons
- Document surrender period appropriateness
- Ensure senior understands product
When must the Annuity Buyer's Guide be provided in Texas?
How long is the free look period for an annuity sold to a 65-year-old in Texas?
In a Texas annuity illustration, which element must be labeled as non-guaranteed?
What additional disclosure is required for annuity replacements in Texas?
If a Texas consumer returns an annuity during the free look period, they receive: