Annuity Best-Interest Rule Checklist for Producers
Updated October 2026
Short answer: Under the annuity best-interest rule (the NAIC's 2020 revisions to Model #275), every annuity recommendation must be in the consumer's best interest. Producers meet that standard through four obligations (care, disclosure, conflict of interest and documentation), a one-time 4-credit annuity training course plus carrier product training, and records that show what was collected, disclosed and recommended, and why.
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What is the annuity best-interest rule?
The best-interest standard comes from the NAIC's 2020 revisions to the Suitability in Annuity Transactions Model Regulation (#275). It requires annuity recommendations by producers and insurers to be in the consumer's best interest, without placing their own financial interest ahead of the consumer's. The NAIC reports that 48 states have adopted the revisions.
Two clarifications producers ask about most:
- It isn't a fiduciary standard. The model states that these requirements don't create a fiduciary obligation or relationship; they create a regulatory obligation.
- Your state's version controls. States adopt the model with their own edits, effective dates and retention periods. Check your resident and non-resident states.
This article is general education for licensed professionals, not legal advice.
The four best-interest obligations
1. Care obligation
You must exercise reasonable diligence, care and skill to know the consumer's financial situation, insurance needs and objectives; understand the available recommendation options after a reasonable inquiry; have a reasonable basis to believe the option you recommend effectively addresses the consumer's situation; and communicate the basis for the recommendation. No single factor is considered in isolation.
The model defines consumer profile information to include, at a minimum: age, annual income, financial situation and needs (including debts), financial experience, insurance needs, financial objectives, intended use of the annuity, financial time horizon, existing assets and products, liquidity needs, liquid net worth, risk tolerance (including willingness to accept non-guaranteed elements), the financial resources used to fund the annuity, and tax status.
For exchanges and replacements, you consider the whole transaction: surrender charges, a new surrender period, lost benefits, added fees or rider charges, whether the new product would substantially benefit the consumer over its life, and whether the consumer has had another exchange or replacement, particularly within the preceding 60 months. For the tax rules and paperwork on exchanges, see our 1035 exchange checklist.
2. Disclosure obligation
Before the recommendation or sale, you disclose on a form substantially similar to the model's Appendix A:
- The scope and terms of your relationship with the consumer.
- The products you're licensed and authorized to sell, and whether you offer annuities from one insurer or from two or more.
- The sources and types of cash and non-cash compensation you receive.
- The consumer's right to request more information about cash compensation.
If the consumer asks, you provide a reasonable estimate of the cash compensation and whether it's one-time or recurring.
3. Conflict of interest obligation
You must identify and avoid, or reasonably manage and disclose, material conflicts of interest. A material conflict of interest is a financial interest in the sale that a reasonable person would expect to influence the impartiality of a recommendation. The model specifically excludes cash and non-cash compensation from that definition, but compensation still has to be disclosed.
4. Documentation obligation
You make a written record of every recommendation and its basis. Two signed consumer statements cover the edge cases:
- Appendix B when the consumer refuses to provide profile information.
- Appendix C when the consumer buys an annuity that isn't based on your recommendation.
Annuity best-interest training requirements
Under the model, a producer must complete a one-time 4-credit annuity training course approved by the department of insurance before selling annuities, plus the carrier's product-specific training. Producers who completed an earlier approved course had six months after their state's amended effective date to take either a new 4-credit course or an additional one-time 1-credit course on sales practices, replacement and disclosure. Insurers must verify completion before you sell their products, so keep certificates current and on file.
Practical best-interest checklist for every annuity case
| Stage | What to do | Keep in the file |
|---|---|---|
| Before the meeting | Confirm license, appointment, 4-credit course, carrier product training and AML | Certificates and appointment confirmations |
| Discovery | Gather every consumer-profile item; note where the money comes from | Completed fact finder; Appendix B if the client declines |
| Disclosure | Deliver the Appendix A-style disclosure before recommending | Signed disclosure; notes on oral disclosures |
| Analysis | Compare options you're authorized to sell against the profile | Illustrations and comparisons you reviewed |
| Replacement review | Weigh surrender charges, lost benefits, fees and the 60-month history | Replacement forms and a written rationale |
| Recommendation | Explain the basis in plain language | Written record of the recommendation and why |
| Submission | Check forms for completeness before sending | Final application packet |
| After issue | Deliver the contract and review the free-look period | Delivery receipt and service notes |
Write the rationale as if a reviewer will read it two years from now without you in the room. Tie each point back to a profile item: "Client needs income starting in five years; liquid reserves outside the annuity cover twelve months of expenses."
Recordkeeping: what to keep and for how long
The model requires insurers and producers to maintain, or be able to make available to the commissioner, records of the information collected from the consumer, disclosures made (including summaries of oral disclosures) and other information used in making the recommendation. Each state sets the retention period; the model's drafting note says that for some states it may be five years. Follow your state's rule and your carriers' requirements, whichever is longer.
Insurers also must maintain a supervision system that reviews each recommendation before an annuity is issued. That review is where incomplete fact finders and thin rationales get kicked back, which is why pre-submission review matters.
Safe harbor for financial professionals under comparable standards
Recommendations made under comparable standards, such as SEC and FINRA best-interest rules for broker-dealers, satisfy the model's requirements, subject to insurer monitoring and information-sharing conditions. Advisors working under those regimes should still confirm how each carrier applies the safe harbor. See the financial advisors page for how hybrid and insurance-licensed advisors work with BetterAnnuityComp.com.
How case management helps you stay compliant
BetterAnnuityComp.com's case management includes a pre-submission review of new business and best-interest or suitability paperwork to help prevent NIGO, plus 1035 exchange and transfer tracking. Its back office tracks licenses, appointments, AML and training certificates. You still own the recommendation; the review helps the file prove it. More on how the process works is on the FAQ page.
Frequently asked questions
Can BetterAnnuityComp.com beat my current annuity commission?
That is our sole job: no matter your current commission level, if you meet our minimum requirements (solo producers have none), you automatically get higher commission than where you are today. Starting comp is for every producer, including new producers with no experience, and there is no production minimum. If you have strong production to show, we contract you above our starting comp, and established agencies, financial advisors and financial firms, and healthcare agencies can earn above it too. Submit your application, schedule a Zoom and share your current commission levels by carrier. We compare them carrier by carrier and contract you above them, with full back office support, case management, carrier contracting and sales tools included.
Does the NAIC annuity best-interest standard make producers fiduciaries?
No. Model #275 states that its best-interest requirements do not create a fiduciary obligation or relationship and only create a regulatory obligation. Producers must still meet the care, disclosure, conflict of interest and documentation obligations.
How many training credits does the annuity best-interest rule require?
The model requires a one-time 4-credit annuity training course approved by the department of insurance, plus carrier product-specific training. Producers who completed an earlier course could instead take an additional one-time 1-credit course within six months of their state's amended effective date.
Is commission a conflict of interest under Model #275?
Not by itself. The model excludes cash and non-cash compensation from the definition of a material conflict of interest, but producers must disclose the sources and types of compensation and, on request, a reasonable estimate of cash compensation.
How long must producers keep annuity sales records?
Each state sets the period. The model leaves the number of years to the states, and its drafting note says some states may use five years. Follow your state's rule and any longer carrier requirement.
What if a client refuses to share financial information?
Obtain a signed statement on a form substantially similar to the model's Appendix B documenting the refusal and the client's understanding of the consequences. You still need a reasonable basis for any recommendation you make.
Sources
- NAIC — Annuity Suitability and Best Interest Standard
- NAIC — Suitability in Annuity Transactions Model Regulation (#275)
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