Annuity Training – A Primer for Insurance Licensees in Pennsylvania
If you’re working to get your insurance license in Pennsylvania, you’re probably excited about two things. The first is the opportunity to help people, protecting them from potentially life-ruining risks. The second is the stable, lucrative career.
And as an insurance professional, you’ll want to be able to offer people the broadest protections possible. By selling annuities, you can help them safeguard against the risk of outliving their income, giving retirees peace of mind. But who can sell annuities? And once you get your license, do you need specific annuity training as part of your continuing education? Is it worth the effort?
Our goal is to set Pennsylvania insurance pre-licensees up for success. So we’ve rounded up some of the most common annuity questions and answers for you here.
Who can sell annuities in Pennsylvania?
You need to have a specific line of authority attached to your Pennsylvania insurance license in order to sell annuities. Per state statutes, you need to be authorized to sell life insurance or variable life/variable annuity products in order to sell annuities.
In Pennsylvania, you need 24 hours of pre-license education per line of authority you want for your license. So if you were already considering completing the 24-hour life insurance pre-license course, you’ll be happy to know that you’ll be able to offer your clients annuities with that license type.
You don’t have to limit yourself to just life insurance, either. You can choose a combo pre-license course — like this life plus health and accident class — to get the pre-license education you need for multiple lines of authority.
Both of those courses include annuity training so you’ll be ready to offer this product to your clients.
How did Act 48 change annuities?
The day after Christmas in 2018, Pennsylvania annuity law changed thanks to Act 48.
It didn’t alter the license type you need to sell annuities, so don’t panic there. But it did impact the amount of work you’ll need to do to maintain your ability to sell annuities. Specifically, you’ll need to take four hours of annuity training as part of your continuing education (more on that next).
Beyond that, Act 48 introduced what the state calls suitability requirements for annuities. Basically, this Act aims to prevent insurance licensees from selling annuities to people that they won’t benefit. It also tightens when you can offer replacement annuities.
Per Act 48, you need to consider the individual’s:
- Age
- Financial situation, including current annual income and existing assets
- Liquidity needs
- Ability to fund the annuity
- Use of the annuity
- Risk tolerance
- Tax status
And before you can recommend a replacement annuity, you need to look at the way it would benefit the individual, whether or not they would have to pay a surrender charge, and if they’ve had another annuity replacement in the three years prior.
You’re also responsible for educating the client on all the features of the annuity you’re recommending, including potential tax penalties and surrender charges.
Ultimately, the state says that to be in accordance with Act 48, the “aspects of the annuity must be suitable, and, in the case of a replacement, the transaction as a whole must be suitable for the customer based on the customer’s suitability information.”
Finally, Act 48 puts new documentation requirements in place. Each time you sell an annuity, you need to record all of your recommendations and why you thought they were suitable for that individual and their situation.
Additionally, if the client declined to give you certain information that would help you determine the suitability of an annuity, you need to have them sign a statement signifying that refusal. And if the customer went with an annuity that you didn’t recommend, you need them to sign a statement saying that they know it wasn’t based on your recommendation. Basically, all of these documentation requirements are to protect you, so they’re worth following.
Once I get my license, do I need annuity training with my continuing education?
Yes — but don’t worry, it’s a one-and-done thing. You just need four hours of annuity training in order to meet the requirement. And you have the full two-year cycle before your first renewal to get these hours completed.
Even if you’re not actively selling annuities, if you’re licensed to (i.e., if you have a life insurance license), you need this training.
Now you know who can sell annuities and the annuity training you need to keep your license in place. We hope these annuity questions and answers help you decide if getting licensed to sell annuities makes sense for you.