2.2 Nevada Annuity Regulations

Nevada has adopted the NAIC Suitability in Annuity Transactions Model Regulation, including the best-interest amendments effective November 15, 2024. Annuities are sold under the Life line of authority in Nevada (the Life exam expressly "includes fixed annuities").

The Best-Interest Standard

Under the best-interest standard a producer must act in the consumer's best interest — not place their own financial interest ahead of the consumer's — when recommending an annuity. The standard is built from four obligations:

Required Annuity Training

Important: The 4-hour course is a one-time prerequisite to selling annuities — producers already licensed before the effective date were given a transition window to complete it. Carriers must verify completion before allowing annuity sales.

Suitability Information the Producer Must Gather

Before recommending, the producer makes reasonable efforts to obtain the consumer's suitability profile:

Annuity Incontestability (NRS 688A.200)

Annuity and pure-endowment contracts include a 2-year incontestability period measured from issue, during the annuitant's lifetime. Exceptions apply for nonpayment of stipulated payments, and disability or accidental-death provisions may be excepted at the insurer's option.

Free Look

During the free look the buyer may return the contract for a full refund. For replacement annuities, the producer must also follow Nevada's replacement disclosure rules (Chapter 2.3).

Carrier Supervision and Senior Protections

Insurers must maintain a supervision system: train producers on best-interest requirements, review recommendations, and take corrective action for violations. Annuity sales to seniors draw heightened scrutiny — producers should clearly explain surrender charges, withdrawal restrictions, and how a recommended contract compares to what the consumer already owns, and document why a replacement (if any) benefits the consumer.

Exam Tip: "Suitability" gathers facts; "best interest" adds care, disclosure, and conflict-management duties on top. The recommendation must be documented either way — an undocumented recommendation is itself a violation.

Annuity Types and the Producer's License

Nevada's Life license (which "includes fixed annuities") authorizes the sale of fixed and fixed-indexed annuities. A variable annuity is also a security, so the producer must additionally hold a FINRA registration (Series 6 or 7) and a state variable-products authority; recommending a variable annuity without securities registration is prohibited.

Disclosure, Surrender Charges, and the 1035 Exchange

For any annuity recommendation, the producer must explain how the contract works in plain terms: the accumulation vs. annuitization (payout) phases, the surrender-charge schedule (and how long it runs), any market-value adjustment, and tax treatment of withdrawals. A Section 1035 exchange lets a client move from one annuity (or life policy) to an annuity on a tax-deferred basis — but a 1035 exchange is still a replacement for Nevada disclosure purposes, and it must clear the best-interest analysis.

A producer who pushes a 1035 exchange that merely restarts surrender charges without a clear consumer benefit violates the standard.

Free-Look and Senior Suitability in Practice

During the 10-day free look, an annuity buyer may cancel for a refund (return of premium, or account value, per the contract). Because annuities are commonly sold to retirees, Nevada expects producers to weigh liquidity needs carefully — an illiquid, long-surrender-charge annuity is rarely suitable for a senior who may need the funds, and recommending one without documenting the basis invites a suitability complaint and discipline.

Exam Tip: A variable annuity is a security — selling it requires FINRA registration on top of the Nevada Life license. Pure fixed and fixed-indexed annuities need only the Life license.

Annuity Phases and Payout Choices

Understanding the two phases helps producers explain a contract accurately. In the accumulation phase, premiums grow tax-deferred. In the annuitization (payout) phase, the accumulated value is converted into a stream of income. The owner chooses a settlement/payout option:

Producers should match the option to the client's goal — maximum income vs. survivor protection — and document the rationale under the best-interest standard.

Exam Tip: Life only pays the most per period but leaves nothing at death; joint and survivor protects a spouse but pays less. The trade-off between payout size and survivor protection is commonly tested.