Suitability of Annuity and Life Insurance Transactions for Seniors

By Michael Lustig

Suitability of Annuity and Life Insurance Transactions for Seniors provides an in-depth examination of annuity and life insurance for Seniors in the United States with an emphasis on the regulations and policies that govern it and the types of annuities according to premiums paid, payout and investment options. This textbook provides a wealth of information regarding annuities, including public policy regarding Florida legislation protecting seniors and duties of insurers and insurance agents, and is a good source of information both for those new to annuities and senior life insurance transactions as well as a great review for those who are the more experienced in the field.

• Language: English
• Publisher: Michael Lustig
• Release date: Aug 8, 2011
• ISBN: 9781933891705

Michael Lustig

Michael Lustig is a graduate of the University of San Diego, California and a former Professor at California State University at Pomona and Immaculate Heart College (Los Angeles). He has been a California Real Estate Broker and the Owner and President of Real Estate License Services, a California real estate and insurance licence school, since 1978, offering state-approved license courses in 47 states and the District of Columbia. He is the author of 35 books on real estate and insurance topics.

Book preview

SUITABILITY OF ANNUITY AND LIFE INSURANCE TRANSACTIONS FOR SENIORS

Prepared by Michael Lustig

Contributing Editor: Denise Iona

Distributed by:

Real Estate License Services

5059 Newport Ave. #209

San Diego, CA 92107

Phone Toll-Free 1-800-877-5445

Smashwords Edition

© Copyright 2010 - 2006 by Michael Lustig, Real Estate License Services. Copyright registered. All contents protected by laws of copyright. No portion of this book may be reprinted, reproduced, transmitted, stored in a retrieval system or on the Internet, or otherwise utilized in any form or by any means, electronic, mechanical, or otherwise, including photocopying or recording, now existing or hereinafter invented, nor may any part of this book be used for teaching without the prior written consent of Michael Lustig.

Contents

CHAPTER ONE: NEW FLORIDA LEGISLATION PROTECTING SENIORS

INTRODUCTION

SENIORS AT RISK

THE JOHN AND PATRICIA SEIBEL ACT

DEFINITIONS - SUITABILITY - COMPARISON OF BENEFITS - FREE LOOK PERIOD- ETHICAL CONDUCT - USE OF DESIGNATIONS - FALSE SIGNATURES - PENALTIES - COMPLAINTS - CONTINUING EDUCATION REQUIREMENT

CHAPTER ONE QUIZ

ANSWERS TO CHAPTER ONE QUIZ

CHAPTER TWO: ANNUITY PRODUCTS

INTRODUCTION

ISSUE AGES - ANNUITY CONTRACT PHASES - THE PROCESS OF ANNUITIZATION

ANNUITY TYPE ACCORDING TO PREMIUMS PAID

IMMEDIATE ANNUITIES - DEFERRED ANNUITIES

ANNUITY TYPE ACCORDING TO PAYOUT

IMMEDIATE ANNUITIES—SINGLE PREMIUM - DEFERRED ANNUITIES—SINGLE PREMIUM - DEFERRED ANNUITIES—FIXED PREMIUMS - DEFERRED ANNUITIES—FLEXIBLE PREMIUMS

ANNUITY TYPE ACCORDING TO INVESTMENT OPTIONS

FIXED ANNUITIES - VARIABLE ANNUITIES - EQUITY INDEXED ANNUITIES - MARKET VALUE ADJUSTED ANNUITIES - GROUP ANNUITIES - SETTLEMENT OPTIONS

CHAPTER TWO QUIZ

ANSWERS TO CHAPTER TWO QUIZ

CHAPTER THREE: DUTIES OF INSURERS AND INSURANCE AGENTS

INTRODUCTION

COLLECTING NECESSARY INFORMATION

PERSONAL INFORMATION - INVESTMENT OBJECTIVES - RISK TOLERANCE - FINANCIAL SITUATION AND NEEDS - EXISTING ASSETS - ANNUAL INCOME - TAX STATUS - LIQUID NET WORTH AND LIQUIDITY NEEDS - THE INTENDED USE OF THE ANNUITY - SOURCES OF FUNDS TO PURCHASE THE ANNUITY - OTHER RELEVANT INFORMATION

IF THE INFORMATION IS NOT PROVIDED

IF THE SENIOR IS CURRENTLY HOLDING AN ANNUITY CONTRACT

IF THE TRANSACTION IS AN EXCHANGE

DISCLOSURE

CREDITING METHODS - GUARANTEED INTEREST CREDITS - ADVANTAGES OF TAX DEFERRAL - POTENTIAL TAX IMPLICATIONS - RISK FACTORS

SUPERVISORY SYSTEMS

AGENT PROCEDURES TO ENSURE SUITABILITY COMPLIANCE

CHAPTER THREE QUIZ

ANSWERS TO CHAPTER THREE QUIZ

CHAPTER FOUR: ETHICAL CONSIDERATIONS

INTRODUCTION

THE ISSUE OF BUYER COMPETENCE

LEGAL CAPACITY TO CONTRACT

UNIQUE ETHICS AND COMPLIANCE ISSUES

POLICYHOLDER BILL OF RIGHTS

AGENT CODE OF ETHICS

FLORIDA ADMINISTRATIVE CODE - THE NATIONAL ASSOCIATION OF INSURANCE AND FINANCIAL ADVISORS (NAIFA)

AGENT FIDUCIARY RESPONSIBILITY

CASE LAW AND FIDUCIARY RESPONSIBILITY

MITIGATION OF RESPONSIBILITY

REASONABLY APPROPRIATE ACTION - PENALTIES MAY BE REDUCED OR ELIMINATED

HARM TO A CONSUMER

UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS

PROHIBITED PRACTICES

PENALTIES

HEARING REQUEST - ADMINISTRATIVE FINES - PROBATION

RECORDKEEPING

REPRESENTING UNAUTHORIZED ENTITIES

CHAPTER FOUR QUIZ

ANSWERS TO CHAPTER FOUR QUIZ

CHAPTER ONE: NEW FLORIDA LEGISLATION PROTECTING SENIORS

INTRODUCTION

Annuity sales have become big business in recent years. This is of special concern in Florida because of the state’s high number of senior residents. According to the U. S. Census Bureau, Florida has the highest proportion of elderly (ages 65 and over), 19 percent. Seniors are especially at risk and vulnerable when it comes to sales pitches of any kind.

Many senior citizens have amassed significant savings, have benefited from real estate appreciation, and have had the advantage of long-term employment and pension plans. As a result, they are often targeted differently from a marketing perspective than younger people without such assets.

Insurance companies, brokerage firms, and financial planners understand the money to be made by selling annuities to this group. Significant growth opportunities exist for annuity products because of favorable demographic and economic trends, and many issuers and financial professionals are directing their marketing efforts toward older Americans.

Older consumers are understandably concerned about medical care and costs, increasing living expenses and inflation, the reliability of our Social Security system, and even pension uncertainties. In homes and retirement communities, seniors with time on their hands and money in the bank are inundated with sales pitches over invitations to breakfast, lunch, and dinner.

Clearly, senior citizens are a growing market and increasingly likely to hear sales pitches for annuities, most of which are legitimate presentations but, unfortunately many of which are motivated by hefty commissions. Variable annuities can generate sales commissions two to twenty times higher than sales commissions gained through the sales of mutual funds. They pay a large up front commission