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7.7.2 Variable Annuity Regulation and Licensing

The company that actually issues the variable annuity in Florida may be chartered as a life insurance company or a variable annuity company, but they must be authorized to do business in the State of Florida. Any company that sells variable annuities comes under the supervision of the state insurance department.

No one may sell variable annuities in Florida unless duly licensed and appointed as a life including variable annuity agent. Insurers are subject to dual regulation by the SEC and the state insurance department. The agent is regulated by the state department, but the annuity is regulated by the SEC; hence, dual regulation. All states require salespeople to hold a valid life insurance license to sell any type of annuity.

What has been the role of the SEC in the development of both variable annuity contracts and separate account contracts?

Florida law also specifies that every applicant form for an individual contract on a variable basis contain a specific question as to any amount of fixed dollar income receivable by the prospective annuitant as well as whether the variable annuity in question would replace any fixed dollar annuity or any other life insurance policy.

Does Florida law specify what an insurer must do if an applicant indicates that a variable annuity would be the sole source of retirement income for the applicant?

A fixed dollar annuity guarantees a fixed minimum dollar amount for each annuity payment and it guarantees the principal and minimum interest rate. Despite these guarantees, a risk is still assumed by the annuity buyer.

Helpful Hint

1
Section 7.7 Review

A variable annuity offers a plan:

a) for a lifetime annuity income.
b) that should be undertaken only as a long-term program.
c) based primarily on equity investments.
d) to provide payments that can change monthly in dollar amount.
e) All of the above.
CORRECTTRY AGAIN (Lesson 7.7)
Check your answer

2

Since variable annuities are primarily based on equity investments, monetary benefits can change monthly.

a) True
b) False
CORRECTTRY AGAIN (Lesson 7.7)
Check your answer

3

At the time of presentation for a variable annuity, the client must be given a prospectus.

a) True
b) False
CORRECTTRY AGAIN (Lesson 7.7)
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4

At the time of retirement, the variable annuity unit calculation is made and from then on the number of annuity units _______________ for that annuitant.

a) increases annually
b) decreases annually
c) remains the same
CORRECTTRY AGAIN (Lesson 7.7.1)
Check your answer

5

Insurers are required by law to provide annuity owners with an annual report which states the units credited to the contract and the dollar value of a unit. The data must be updated no more than __________ prior to the date the report is mailed.

a) one month
b) two months
c) six months
d) 12 months
CORRECTTRY AGAIN (Lesson 7.7.1)
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6

Florida law specifies that every applicant form for an individual contract on a variable basis contain a specific question as to any amount of fixed dollar income receivable by the prospective annuitant as well as whether the variable annuity in question would replace any fixed dollar annuity or any other life insurance policy.

a) True
b) False
CORRECTTRY AGAIN (Lesson 7.7.2)
Check your answer