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Tennessee Life exam — Annuities.
Annuity types, phases and taxation are covered in the national Annuities guide. Tennessee regulates annuity sales under Rule 0780-01-86, its version of the NAIC best-interest model. This guide covers what that rule requires.
Best-interest standard (Rule 0780-01-86-.06)
A producer who recommends an annuity must act in the consumer's best interest. The producer and insurer can't put their own financial interests first. The producer meets that standard by satisfying four obligations:
| Obligation | What it requires |
|---|---|
| Care | Know the consumer's profile, understand the options, and have a reasonable basis that the recommendation fits. For an exchange or replacement, consider surrender charges, lost benefits, higher fees, and any other exchange or replacement in the past 60 months. |
| Disclosure | Before the recommendation, explain the producer's role and licenses, the insurers represented, and the sources and types of cash and non-cash compensation. Tell the consumer they can request more compensation detail. |
| Conflict of interest | Identify material conflicts and avoid or disclose them. |
| Documentation | Record the basis for the recommendation. If the consumer refuses to give profile information, get a statement signed by the consumer documenting the refusal and its consequences. |
- The rule creates a regulatory duty, not a fiduciary relationship.
- It doesn't require ongoing monitoring.
- It doesn't require recommending the lowest-cost or lowest-commission product.
- Consumer profile information includes:
- age and income
- financial objectives and time horizon
- liquidity needs
- risk tolerance
- tax status
- Replacement includes:
- lapsing, surrendering or partially surrendering a contract
- converting or reducing one
- using an existing contract in a financed purchase
Insurer duties
- The insurer must have a reasonable basis to believe the annuity meets the consumer's needs. It must run a supervision system (.06(3)).
- It must confirm the producer has finished the required training before letting the producer sell its annuities.
Training and records
- Producers selling annuities complete a one-time 4-credit-hour course approved by the Department (.07).
- Insurers, agencies and producers keep records for 5 years after the transaction (.09).
Exempt transactions (.04)
- ERISA and other employer-sponsored plans
- government and church plans
- structured settlements
- direct-response sales with no recommendation
- formal prepaid funeral contracts
Guaranty protection
The Tennessee Life and Health Insurance Guaranty Association covers up to $250,000 in present value of annuity benefits per life (56-12-204).
Common exam traps
- Best interest rests on four obligations: care, disclosure, conflict of interest and documentation.
- It's a regulatory duty, not a fiduciary one.
- The replacement review looks back 60 months.
- Training is a one-time 4 hours. Records are kept 5 years.
- A partial surrender to fund a new annuity is a replacement.
Practice Annuities questions All Life topics
Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Insurance Department and the exam administrator before relying on it.
