Key Takeaways
- Washington requires a 10-day free look period for annuities (20 days for seniors 60+)
- Washington follows the NAIC Suitability in Annuity Transactions Model Regulation
- Producers must have reasonable grounds to believe an annuity recommendation is suitable
- Washington requires disclosure of surrender charges and fees before purchase
- Annuity replacements require detailed comparison and documentation
Washington Annuity Regulations
Washington has adopted comprehensive annuity regulations to protect consumers from unsuitable sales and deceptive practices.
Free Look Period
Washington provides free look periods for annuity contracts:
| Buyer Age | Free Look Period |
|---|---|
| Under 60 | 10 days |
| 60 and older | 20 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 policy is delivered
Suitability Requirements
Washington 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
Washington requires:
- Recommendations must be in the best interest of the consumer
- Compensation cannot be the primary motivator
- Material conflicts must be disclosed
- Documentation of suitability analysis
Disclosure Requirements
Washington requires specific disclosures for annuity sales:
Pre-Purchase Disclosures
| Disclosure Item | Requirement |
|---|---|
| Surrender Charges | Full schedule and duration |
| Fees and Expenses | All charges explained |
| Guaranteed vs. Non-Guaranteed | Clear distinction |
| Death Benefit | Explanation of provisions |
| Free Withdrawal | Annual withdrawal allowance |
Buyer's Guide
Producers must provide:
- NAIC Annuity Buyer's Guide
- Product-specific disclosure
- Illustration if applicable
- Time to review before purchase
Senior-Specific Considerations
For sales to seniors (age 60+):
- Extended 20-day free look period
- Enhanced suitability scrutiny
- Consider liquidity needs carefully
- Document rationale thoroughly
Exam Tip: Washington extends the free look period to 20 days for buyers age 60 and older, not 65 like some states.
Surrender Charge Rules
Washington regulates surrender charges:
| Requirement | Rule |
|---|---|
| Disclosure | Must clearly explain in writing |
| Schedule | Must provide full schedule |
| Free Withdrawal | Must disclose penalty-free options |
| Duration | Cannot be unreasonably long |
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
OIC 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 an annuity sold to a 62-year-old in Washington?
What must a Washington producer provide to an annuity buyer before the sale?