Annuity basics (phases, product types, payout options, taxation) are in the national Annuities guide. Alabama adds a best interest standard and training requirement (Ala. Admin. Code 482-1-137), disclosure and Buyer's Guide rules (482-1-129), and replacement rules shared with life insurance (482-1-133). Fixed annuities are sold under the life line of authority (Ala. Code 27-7-14.1). Variable annuities also need the variable line and securities registration.

Best interest standard

Since January 1, 2022, a producer recommending an annuity must act in the consumer's best interest by meeting four obligations (482-1-137-.06):

1. Care. Know the consumer's profile, understand the options, and have a reasonable basis for the recommendation. Consumer profile information includes, at minimum:
   • age, income, and financial situation and needs
   • experience and objectives
   • intended use and time horizon
   • existing assets and liquidity needs
   • liquid net worth and risk tolerance
   • funding source and tax status
2. Disclosure. Before recommending, give a disclosure describing the relationship, the products the producer may sell, the insurers represented, and how the producer is paid.
3. Conflict of interest. Identify material conflicts and avoid or disclose them.
4. Documentation. Record the recommendation and its basis in writing. If the consumer refuses to give profile information, get a signed statement documenting the refusal.

Limits of the standard:

• It is a regulatory obligation, not a fiduciary duty.
• It doesn't require recommending the lowest-cost product and doesn't impose ongoing monitoring.
• For an exchange or replacement, the producer weighs surrender charges, lost benefits, and new fees. The producer also considers whether the consumer had another exchange or replacement in the past 60 months.

Insurer duties.

• The insurer may not issue a recommended annuity unless it has a reasonable basis to find the annuity meets the consumer's needs.
• Its supervision system must eliminate sales contests, quotas, and bonuses tied to specific annuities within a limited period.
• Records are kept three years after the transaction (482-1-137-.08).

Exempt transactions (482-1-137-.04) include annuities funding:

• ERISA plans and employer 401(a), 401(k), 403(b), SEP, and SIMPLE plans
• government and church plans and nonqualified deferred compensation
• structured settlements
• prepaid funeral contracts

Training

• Before selling annuities, a producer completes a one-time 4-credit-hour annuity training course (482-1-137-.06.1).
• The insurer must verify completion before letting the producer sell its annuities.

Disclosure document and Buyer's Guide

If the documents aren't given at or before application, the contract must include a free look of at least 15 days.

Replacement

• A replacing annuity must give 30 days to return it for a full refund (or, for variable products, the account value plus charges) (482-1-133-.06).
• The replacing insurer notifies the existing insurer within five business days.
• The existing insurer must provide policy information within five business days of the owner's request.

Guaranty protection

The Alabama Life and Disability Insurance Guaranty Association covers annuity present value up to $250,000 (Ala. Code 27-44-3). Values not guaranteed by the insurer, such as variable subaccounts, are not covered.

Common exam traps

• Best interest has four obligations; documentation is the one most often forgotten.
• A consumer who refuses profile information signs a statement saying so. The sale isn't automatically barred.
• Late delivery of the disclosure triggers a 15-day free look; a replacement gets 30 days.
• Records are kept three years.
• An annuity funding a 401(k) is exempt from the best interest rule.