Key Takeaways
- Alabama requires a 10-day free look period for annuity contracts
- Alabama follows the NAIC Suitability in Annuity Transactions Model Regulation
- Producers must document suitability analysis before recommending annuities
- Replacement annuities require detailed comparison disclosures under Regulation 482-1-133
- Senior consumers (65+) have enhanced protections for annuity purchases
Alabama Annuity Regulations
Alabama has adopted comprehensive annuity regulations based on the NAIC Suitability in Annuity Transactions Model Regulation to protect consumers.
Free Look Period
Alabama provides a 10-day free look period for annuity contracts:
- Applies to all annuity types (fixed, variable, indexed)
- Buyer can return for full premium refund
- No penalty for exercising free look
- Period begins when contract is delivered
- Variable annuities may have market-adjusted refunds
Suitability Requirements
Alabama requires producers to follow suitability standards:
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 |
Suitability Determination
The producer must have reasonable grounds to believe:
- Consumer has been informed of annuity features
- Annuity is suitable for consumer's needs
- Consumer understands surrender charges and limitations
Senior Consumer Protections
Alabama provides enhanced protections for consumers age 65 and older:
Additional Requirements for Seniors
- Additional disclosure of surrender charges
- Clear explanation of liquidity limitations
- Documentation of understanding
- Careful assessment of suitability
Prohibited Practices with Seniors
- High-pressure sales tactics
- Misleading comparisons
- Unsuitable recommendations
- Failure to consider existing coverage
Replacement Requirements (Regulation 482-1-133)
Alabama Insurance Regulation Chapter 482-1-133 governs annuity replacements:
When Replacement Occurs
When contemplating the purchase of an annuity contract, if the purchase involves discontinuing or changing an existing contract, a replacement is occurring.
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
Replacement Considerations
| Factor | Evaluation |
|---|---|
| Surrender Charges | New surrender period starts |
| Benefits Lost | Death benefits, guarantees |
| Tax Implications | 1035 exchange requirements |
| Fees | Comparison of costs |
Rate Regulation Note
ALDOI does not regulate life insurance or health insurance premium rates per ALA. CODE 27-13-2, with exceptions for Medicare Supplement rates, HMO rates, and Long-Term Care rates.
What Alabama regulation governs life insurance and annuity replacements?
Which consumers receive enhanced protections for annuity purchases in Alabama?
What is the free look period for annuities in Alabama?