Annuity types, phases, payout options and taxation are covered in the national Annuities guide. North Carolina adds:

• standard contract provisions for individual annuities (G.S. 58-58-23)
• a best interest sales rule (11 NCAC 12 .0462)
• a disclosure law (58-60-135, 58-60-145)
• a few contract protections that show up on the Life exam

Best interest standard (11 NCAC 12 .0462)

• Since January 1, 2023, annuity recommendations in North Carolina have been governed by the NAIC Suitability in Annuity Transactions Model Regulation (#275). The rule incorporates the version adopted at the NAIC's Spring 2020 meeting, which added the best interest standard.
• In practice, the producer meets the model's care, disclosure, conflict of interest and documentation obligations. The national guide explains how they work.

Disclosure (58-60-135)

If the documents weren't provided at or before application, the applicant gets a free look of at least 15 days. It runs at the same time as any other free-look period.

Contract provisions (58-58-23 and related sections)

• Grace period. At least 31 days for each payment after the first. Group annuities and certain survivorship annuities are excepted.
• Misstatement of age or gender. The payment is adjusted to what the stipulated payments would have bought at the correct age. Overpayments may be charged with interest against later payments.
• Reinstatement. Within one year after default, unless the cash surrender value was paid, by paying overdue amounts with interest. A life policy allows five years.
• Surrender fees at death. An insurer may not deliver a deferred annuity that reduces the death benefit by a surrender fee when death occurs during the surrender period (58-58-147).
• Annual report. During accumulation, owners get a report at least annually. It shows the values, amounts credited or charged, and any loans (58-60-145).
• Applications. An individual annuity is issued only on an application. If a producer takes it, the application carries the producer's certificate that the answers were recorded accurately, and it becomes part of the contract (58-58-146).
• Group annuities. Each annuitant gets an individual certificate within 30 days of enrollment. ERISA and qualified plans are excluded (58-58-145).

Who may sell and buy

• Variable annuities need the variable life and variable annuity line of authority. A resident producer must hold a life license and meet the FINRA requirements (58-33-26(c1)(8)).
• Minors aged 15 and older may buy an annuity and exercise all ownership rights (58-58-100).

Replacement and guaranty protection

• North Carolina's replacement rule (11 NCAC 12 .0601 and following) covers annuities as well as life policies. It requires:

  • a signed statement about existing coverage
  • a replacement notice
  • notice to the existing insurer within five business days
  • a 30-day unconditional refund right

  The North Carolina Life Policy Provisions guide explains the process.

• Guaranty association. The North Carolina Life and Health Insurance Guaranty Association caps benefits at $300,000 per life for all benefits, including cash values. Structured settlement payees are covered up to $1 million, and unallocated annuity contract holders up to $5 million (58-62-21).

Common exam traps

• Annuity reinstatement is one year. Life reinstatement is five years.
• The annuity grace period is 31 days.
• Documents not delivered at application mean a free look of at least 15 days.
• A deferred annuity can't cut the death benefit by a surrender fee.
• North Carolina's best interest rule is a regulation, 11 NCAC 12 .0462, effective January 1, 2023.