There will be stricter disclosure regulations on life and annuity products in California starting next July. Immediate annuity products will now have to follow the same disclosure rules that already apply to deferred annuities. Immediate annuities are often sold to seniors and this aging population can be a target for scammers. Insurance News Net’s Cyril Tuohy talks about the changes in the article “Life And Annuity Disclosure Bill Signed Into Law.” Some advisors’ questionable sales of immediate annuities have made this law necessary, so Governor Jerry Brown made the proposed bill into a law this week to help protect his state’s residents. California’s Insurance Commissioner says that this law has important protections in place for consumers. The new disclosure rules have been put in place to help consumers buying annuities and life insurance gather all of the important information regarding the products. Of particular concern is that fact that annuities are long-term investments and not all advisors seem to be letting seniors know this important detail.
Individual and group disability plans as well as group life insurance policies now have to have bold 12-point size type right on the front of the policy. Policyholders also have the options of returning the policy by mail or another type of delivery service. Any annuity or insurance policy can now be returned or canceled within 30 days if the consumer changes their mind about the product. Those selling policies must offer a prorated premium refund to consumers who are 60 or older if they cancel their policy in the first 30 days. Your cancellation rights now have to be clearly printed on the front of your policy or on the coverage page. It will also be printed on each individual annuity contract or life insurance policy. The cancellation and refund disclosures must now be applied to modified guaranteed annuity contracts in the same way that they are for variable annuity contracts and insurance policies.
Surrender charges also have to be referred to as “withdrawal penalties” now in life and annuity contracts. There has been some confusion as to the meaning of a surrender charge, particularly with seniors, and it is believed that the term withdrawal penalty is more self-explanatory. Any annuity contracts or life insurance policies with these penalties must disclose information related to the charges on the front of the policy in bold 12-point font. It has to contain the charge location, time period, information about the charge and any penalty information. The California Insurance Department sponsored this new law and believes that consumers will be better off once it goes into effect July 1, 2015.
Written by Rachel Summit