Questions to Ask Before Buying an Annuity: Get the Answers in Writing

The best protection when you are offered an annuity is often a good list of questions. Annuities can run for decades, and the details that matter most, like surrender charges, crediting formulas and rider costs, are easy to gloss over in a sales conversation.

This guide gathers questions drawn from state insurance regulators, the NAIC's model rules for annuity sales, FINRA and the SEC's rule for broker-dealers. Ask them out loud, but ask for the answers in writing too. A written answer can be compared, checked and, if needed, shown to a regulator later.

This is general information, not financial, insurance, tax or legal advice. Your state insurance department can answer questions for free, and you can ask a licensed professional who is not selling the product to review what you are offered.

Why written answers matter

Written answers are not just a personal preference; much of the paperwork is already required. The NAIC's Suitability in Annuity Transactions Model Regulation (#275, 2020 revision), which the NAIC's November 2023 topic page says most states have enacted in its updated form, calls for the agent to make a written record of any recommendation and the basis for it, and to communicate the basis of the recommendation to you. The NAIC's Annuity Disclosure Model Regulation (2021 edition) calls for a disclosure document covering the contract's guaranteed and non-guaranteed elements, how values can be accessed, any value reductions from withdrawals, the death benefit, a summary of the federal tax status and the impact of any rider.

If you are buying through a broker-dealer, the SEC's Regulation Best Interest requires written disclosure, before or at the time of the recommendation, of the material fees and costs that apply to you and the material facts about conflicts of interest associated with the recommendation.

Questions about the contract

The Texas Department of Insurance (TDI) annuities guide suggests asking the agent or company these questions:

• What is the guaranteed minimum interest rate?
• What is the current interest rate?
• Is there a bonus interest rate, and what are the requirements to get it?
• What are the surrender period and charges?
• Is there a free withdrawal option, and what are its terms?
• Can the annuity lose value?
• Will the annuity pay my beneficiaries after I die?
• What is the maturity or annuitization date?
• What are the fees?

For an indexed annuity, add: how exactly is index-linked interest calculated, and which parts of that formula can the insurer change later? The NAIC disclosure model expects the disclosure document to explain participation rates, caps or spreads and to note that rates may change and are not guaranteed. For a variable annuity, FINRA suggests carefully reading the prospectus and asking the seller "to explain all of the product's features, riders, costs and restrictions."

Questions about the person selling it

• Which products are you licensed to sell? Model #275's disclosure form asks agents to state whether they sell fixed or fixed indexed annuities, variable annuities, life insurance, mutual funds, stocks and bonds, or certificates of deposit.
• Do you sell annuities from one insurer, from several, or mostly from one?
• How are you paid for this sale? Is it a commission, a fee or both, and is it paid once or more than once? Under the 2020 model, the agent should give you a reasonable estimate of cash compensation on request, which may be stated as a range.
• In what capacity are you acting for this recommendation: insurance agent, broker-dealer representative or investment adviser? A broker-dealer must deliver its relationship summary, Form CRS, to a retail investor before or at the earliest of a recommendation, an order or opening an account, under SEC rules.
• What is your National Producer Number? The model disclosure form includes a line for it, and it helps when you check the agent's license with your state.

Questions about the recommendation

• Why this annuity, for me, now? Model #275 calls for the agent to have a reasonable basis to believe the recommendation effectively addresses your financial situation, insurance needs and financial objectives over the life of the product.
• Why do I need each rider or feature you included? The 2020 model calls for a reasonable basis to believe you would benefit from features such as annuitization or a death or living benefit.
• What can't you sell me? The NAIC model does not require agents to analyze products outside their license, so it helps to know what alternatives were never on the table.
• What happens if I need a large share of this money in year two, or year six?
• If this replaces a policy or annuity I already own, what do I lose? Get the surrender charge, any new surrender period, lost benefits and fee differences in writing. FINRA advises making a change only "when it's better for you, not just better for the person recommending the new product."

Questions about the insurer

• What is the insurer's exact legal name, and is it licensed in my state? The NAIC disclosure model calls for the insurer's legal name, physical address, website and phone number in the disclosure document.
• Where can I see its complaint record and financial information? TDI's guide points buyers to the department's help line and website for a company's license status, complaint history and financial rating from an independent rating organization. Many state insurance departments offer similar lookups.

Questions to ask yourself

The person across the table is not the only one who should answer questions. Model #275's consumer profile list is a useful self-check: your income, time horizon, liquidity needs, liquid net worth, risk tolerance, the money you would use to buy the annuity and your tax status. If you could not explain to a family member why this money belongs in this contract, you are not done asking.

If you feel rushed, that is a signal to slow down. A free-look period gives you time to review a contract after you receive it; TDI's guide (last updated October 2023), for example, says annuities sold in Texas must have a 20-day free-look period. Ask your state insurance department how long yours is. For concerns about a brokerage account or a variable annuity, FINRA runs a Securities Helpline for Seniors, which its website lists as 844-574-3577 (checked October 2026).

Key takeaways

• Ask for answers in writing; much of the key paperwork is already required by model rules and SEC regulations.
• Use TDI's contract questions as a baseline, and add formula questions for indexed products.
• Ask how the seller is paid, what they are licensed to sell and in what capacity they are acting.
• Ask why each feature is in the recommendation and what alternatives were never considered.
• Confirm the insurer's exact legal name and license, and answer the profile questions for yourself.

Sources

• Texas Department of Insurance, Annuities guide (last updated October 16, 2023)
• National Association of Insurance Commissioners, Suitability in Annuity Transactions Model Regulation #275 (2020)
• National Association of Insurance Commissioners, Annuity Disclosure Model Regulation #245 (2021)
• National Association of Insurance Commissioners, Annuity Suitability & Best Interest Standard (last updated November 1, 2023)
• FINRA, Annuities
• eCFR, 17 CFR 240.15l-1, Regulation best interest (current text)
• eCFR, 17 CFR 240.17a-14, Form CRS (current text)
• FINRA, Securities Helpline for Seniors