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What is the primary purpose of NAIC Model Regulation #275?

To set capital reserve requirements for life insurers

To regulate the suitability and best interest of annuity recommendations

To establish federal securities law for variable annuities

To set minimum guaranteed interest rates on fixed annuities

to track

2026 Statistics

Key Facts: Annuity Best Interest Exam

4 hours

One-Time Training

NAIC Model #275

70%

Passing Score

Most state-approved vendors

Producer Obligations

Care, Disclosure, COI, Documentation

Suitability Factors

NAIC Model #275 §6A(1)

45+

Adopting States

NAIC adoption tracker

$25-50

Course Cost

State-approved CE vendors

NAIC Model #275 (2020 revision) requires every life-licensed producer who sells annuities to complete a one-time 4-hour Best Interest training plus product-specific training. Existing producers had a 6-month transition window after each state's effective date. The Best Interest standard requires producers to act in the consumer's interest without placing their own ahead of it; it is NOT a fiduciary duty. 45+ states have adopted Model #275. Course typically costs $25-50; passing score is 70%.

Sample Annuity Best Interest Practice Questions

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1What is the primary purpose of NAIC Model Regulation #275?

A.To set capital reserve requirements for life insurers

B.To regulate the suitability and best interest of annuity recommendations

C.To establish federal securities law for variable annuities

D.To set minimum guaranteed interest rates on fixed annuities

Explanation: NAIC Model #275, the Suitability in Annuity Transactions Model Regulation, establishes the standards that producers and insurers must follow when recommending or selling annuities. The 2020 revisions added a Best Interest standard of care that elevates the prior suitability-only standard.

2Under the 2020 revisions to NAIC Model #275, which standard of care now applies to annuity recommendations?

A.Caveat emptor

B.Suitability only

C.Best Interest

D.Strict fiduciary

Explanation: The 2020 revisions elevated the prior suitability-only standard to a Best Interest standard. The producer must act in the consumer's best interest without placing the producer's own financial interest ahead of the consumer's. Best Interest is not a fiduciary duty but is a higher bar than the older suitability standard.

3How many producer obligations make up the Best Interest standard under NAIC Model #275?

A.Two

B.Three

C.Four

D.Five

Explanation: The Best Interest standard is built on four producer obligations: Care, Disclosure, Conflict of Interest, and Documentation. A producer must satisfy all four to be considered to have acted in the consumer's best interest.

4Which of the following is NOT one of the four Best Interest obligations under NAIC Model #275?

A.Care obligation

B.Disclosure obligation

C.Fiduciary obligation

D.Documentation obligation

Explanation: The four obligations are Care, Disclosure, Conflict of Interest, and Documentation. Model #275 explicitly states that Best Interest is NOT a fiduciary obligation. Producers must satisfy these four duties through process, not through selecting a single optimal product.

5Under Model #275, the Best Interest standard is best described as:

A.Identical to a fiduciary duty

B.A duty to recommend the absolute best product on the market

C.A duty to act in the consumer's interest without placing the producer's own ahead

D.A duty owed only to high-net-worth consumers

Explanation: The 2020 NAIC Model #275 defines Best Interest as acting in the consumer's interest without placing the producer's or insurer's financial interest ahead of the consumer's. It does not require selection of the single 'best' product and is explicitly not a fiduciary duty.

6How long is the one-time Best Interest training course required by NAIC Model #275?

A.1 hour

B.2 hours

C.4 hours

D.8 hours

Explanation: Producers must complete a one-time 4-hour Best Interest training course. Producers who already completed the older 4-hour suitability course must take an additional 1-hour course covering only the new Best Interest material.

7A producer who completed the older 4-hour annuity suitability course before the 2020 revisions must now take what additional training?

A.A new 4-hour Best Interest course in full

B.A 1-hour Best Interest update course

C.Nothing - the prior 4-hour course satisfies the new rule

D.An 8-hour combined course

Explanation: Producers who already took the older 4-hour suitability course need only complete an additional 1-hour course covering the new Best Interest standard, the four obligations, and the related disclosure requirements introduced by the 2020 revisions.

8How long is the transition window most states gave existing producers to complete the new Best Interest training after the effective date?

A.30 days

B.90 days

C.6 months

D.1 year

Explanation: Existing producers were given a 6-month transition window from the state's adoption effective date to complete the Best Interest training. New producers must complete the training before soliciting any annuity transaction.

9Approximately how many U.S. states have adopted the 2020 revisions to NAIC Model #275?

A.Fewer than 10

B.About 25

C.More than 45

D.All 50

Explanation: More than 45 states plus the District of Columbia have adopted the 2020 Best Interest revisions to Model #275. A handful of states (notably New York with its Regulation 187) operate under equivalent state-specific Best Interest rules.

10Under NAIC Model #275, how many factors comprise the consumer profile information a producer must collect before making a recommendation?

A.5

B.8

C.13

D.20

Explanation: Model #275 §6A(1) lists 13 suitability factors, including age, annual income, financial situation, financial experience, financial objectives, intended use of the annuity, financial time horizon, existing assets, liquidity needs, liquid net worth, risk tolerance, tax status, and willingness to accept non-guaranteed elements.

About the Annuity Best Interest Exam

The Annuity Suitability & Best Interest training is a one-time 4-hour course and exam required of every life-licensed agent who sells annuities. It implements the NAIC Suitability in Annuity Transactions Model Regulation (#275), revised in 2020 to add a Best Interest standard of care covering Care, Disclosure, Conflict of Interest, and Documentation obligations.

Questions

100 scored questions

Time Limit

1 hour

Passing Score

70%

Exam Fee

$25-50 (course) (State-approved CE vendor)

Annuity Best Interest Exam Content Outline

20%

Annuity Types & Features

Fixed, variable, indexed, immediate, deferred, MYGAs, FIAs (participation rate, cap, spread), and MVA

15%

Suitability Information & Customer Profile

The 13 suitability factors including age, income, financial objectives, time horizon, liquid net worth, and risk tolerance

30%

Best Interest Standard

The four obligations of Care, Disclosure, Conflict of Interest, and Documentation under NAIC Model #275

10%

Replacement & 1035 Exchange Rules

Replacement disclosures, IRC §1035 tax-free exchanges, and surrender charge analysis

10%

Disclosure Forms & Required Notices

Insurance Agent / Insurer Disclosure for Annuities forms and consumer notices

10%

Compensation Disclosure

Cash and non-cash compensation, material conflicts of interest, and required disclosures upon request

Recordkeeping & Producer Supervision

Insurer supervision system, producer records, and minimum retention requirements

How to Pass the Annuity Best Interest Exam

What You Need to Know

Passing score: 70%
Exam length: 100 questions
Time limit: 1 hour
Exam fee: $25-50 (course)

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

Annuity Best Interest Study Tips from Top Performers

1Memorize the four Best Interest obligations: Care, Disclosure, Conflict of Interest, and Documentation - these are the backbone of every exam question on Model #275

2Know the 13 suitability factors cold: age, annual income, financial situation, financial experience, financial objectives, intended use of the annuity, financial time horizon, existing assets, liquidity needs, liquid net worth, risk tolerance, tax status, and willingness to accept non-guaranteed elements

3Understand that Best Interest is NOT a fiduciary duty - producers must put consumer interests ahead of their own financial interest, but the standard is satisfied through process and documentation, not by selecting the single best product

4Distinguish NAIC Model #275 (annuities, regulated by states) from SEC Regulation Best Interest (broker-dealer securities recommendations) - they are parallel but separate regulatory regimes

5Master IRC §1035 tax-free exchange rules and replacement disclosure requirements - replacements draw the most regulatory scrutiny and frequently appear on exam questions

Frequently Asked Questions

Is the Annuity Best Interest training one-time or do I need to renew it?

The 4-hour Best Interest training is a one-time requirement. You do not need to retake it when you renew your license. However, you must complete a one-time additional 1-hour Best Interest training if your state previously required only the older 4-hour suitability course. You also must complete product-specific training each time you contract to sell a new annuity product.

What is the 4-hour annuity course and who has to take it?

It is a one-time 4-hour Best Interest training course covering NAIC Model #275, the four producer obligations, suitability factors, replacement rules, and required disclosures. Every life-licensed producer who solicits, negotiates, or sells annuities must complete it before recommending or selling any annuity in the producer's home state.

Who needs to take Annuity Suitability training?

Every resident and non-resident life-licensed insurance producer who sells fixed, indexed, or variable annuities must complete the 4-hour Best Interest training in any state that has adopted NAIC Model #275 (now 45+ states). Producers selling variable annuities must additionally hold an active Series 6 or Series 7 securities registration.

What is the difference between Best Interest and Suitability?

The original 2010 NAIC Model #275 required only a suitability standard. The 2020 revision elevated this to a Best Interest standard, requiring producers to act in the consumer's interest without placing the producer's own financial interest ahead of the consumer's. Best Interest is NOT a fiduciary duty, but it does require Care, Disclosure, Conflict of Interest, and Documentation obligations be met.

What did the 2020 NAIC Model 275 revisions change?

The 2020 revisions added the Best Interest standard built on four producer obligations: Care, Disclosure, Conflict of Interest, and Documentation. They also expanded suitability information requirements, required new producer and insurer disclosures, mandated compensation disclosure on request, and aligned the model with SEC Regulation Best Interest (Reg BI), which applies only to securities, not annuities.

How many states have adopted NAIC Model 275?

More than 45 states plus DC have adopted the 2020 NAIC Model #275 Best Interest revisions, with rolling effective dates starting in 2020. Only a few states (such as New York, which has its own Reg 187 Best Interest standard) operate under their own equivalent rule rather than Model #275 directly.