Annuities are typically part of a retirement plan to beneficiaries who want a steady income. Money can be invested either in installments or as a lump sum. There are two main types of annuities: fixed and variable. The question becomes finding the best annuities for you. Fixed annuities are considered a safer investment because variable annuities can change dependent on market conditions. They are both subject to different rules and regulated by different organizations.
Fixed annuities are regulated by the Insurance Department or Bureau in each individual state. The National Association of State Insurance Commissioners (NAIC) offers a list of each state department and its contact information. Insurance agencies selling these annuities must be licensed through their state. To be licensed, agencies must be legitimate and meet certain minimum requirements. Often states require insurance agencies to offer a “Free Look” or a “Right to return” policy on fixed annuities. This allows the buyer a designated number of days to review the contract after purchasing. If the buyer decides to change his mind during this period all his money is given back.
Variable annuities are considered securities and are regulated by the U.S. Securities & Exchange Commission (SEC) as well as the NAIC. They are also regulated by FINRA, an independent self-regulatory organization charged with regulating the securities industry endorsed by the SEC.
The Sale of Variable annuities:
Agencies must be licensed through their State, FINRA, and the SEC: Any agency selling a variable annuity must be registered with and possess a Series 6 or Series 7 license through FINRA and any required by the state.
All Federal Laws governing securities apply to Variable Annuities: Agencies must abide by both the National Securities Market Improvement Act of 1996 and the Securities Act of 1933 and other laws to sell variable annuities.
Any complaints about practices of agencies selling annuities should be reported to FINRA, the SEC, and the NAIC. They offer both web and telephone support for such problems.