In document Selling Annuities to Seniors (Page 124-131)

Required Disclosures




This is only a brief description of the Medi-Cal eligibility rules, for more detailed information, you should call your county welfare department. Also, you are advised to contact a legal services program for seniors or an attorney that is not connected with the sale of this product.

I have read the above notice and have received a copy.

Dated: ___________________________________________

Signature: ________________________________________

Signature: ________________________________________”

This disclosure should be presented as a separate document and should be printed in at least 12 point type. It must be signed by the person buying the annuity or the legal representative of that person. The state health services department will maintain the wording and content of the form if the applicable laws change and this disclosure will be available from them if it is updated.

Additionally, if the agent is soliciting a senior client for a life insurance of annuity, the agent is required to present a notice in writing which states that the

liquidation of any stocks, bonds, CDs or other financial instruments may have an effect on their tax situation, as well as early withdrawal charges and other

penalties. The notice should also state that the senior should consult with a legal or finance advisor before liquidating any such assets to purchase the annuity or life insurance policy.

The required disclosure has to have the following structure

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To: ________________________________________

Prospective California Client (please print)

From: ________________________________________

Agent (please print)

Pursuant to California Insurance regulation, I am required to advise you of the following:

In the event I recommend that you sell or liquidate any stocks, bonds, IRA,

certificate of deposit, mutual fund annuity, or other assets to fund the purchase of an annuity from an insurance company, you may be subject to some or all of the following:

4. Tax consequences

5. Early withdrawal penalties 6. Other costs or penalties

You may wish to consult an independent legal or financial advisor before selling or liquidating any assets and prior to purchasing an annuity.

I acknowledge receipt of this disclosure and understand its contents.

_______________________________________ _______________

Signature of Prospective California Client Date

_______________________________________ _______________

Signature of Agent Date

Selling Annuities to Seniors 126

Quiz 9

1. What do the courts consider advertisements? (Lesson 9: Appropriate Advertising)

I. Printed materials

II. Radio and television ads III. Internet web sites and ads IV. Sales presentations

A. I & II only B. I, II & III only C. I & III only D. I, II, III & IV

2. Which of the following seniors would be the most suitable candidate for a trust? (Lesson 9: Introduction)

A. Senior A with two beneficiaries and an investment availability of


B. Senior B with three beneficiaries and an investment availability of


C. Senior C with no beneficiaries and $30,000 for immediate needs D. Senior D with no beneficiary and $250,000 for investments

3. Suppose your marketing plan for annuities expects you to contact a senior citizen after you send them brochures for your annuity product via direct mail.

The fact that you will contact the senior must be disclosed: (Lesson 9:

Advertising for Seniors Age 65+) A. Over the phone.

B. Under a separate mailing.

C. It does not need to be disclosed.

D. Along with the marketing materials.

4. If the Commissioner rules against an insurance seller for misconduct in the selling of annuitants, what does the agent remit the penalty payments to?

(Lesson 9: Appropriate Advertising) A. The injured senior parties B. The insurance fund

C. The National Association of Insurance Commissioners D. The insurance provider

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5. Which of the following pieces of advertisement require written approval before they can be used for annuity sales? (Lesson 9: Appropriate Advertising)

I. Stationery II. Envelopes III. Business Cards

A. I only

B. Both II and III C. Both I and II D. I, II and III

6. The Commissioner will suspend your license if it is found that you have done which of the following? (Lesson 9: Cause for Suspension)

I. Induced a client to make the agent a beneficiary in any annuity policy or trust established by the client.

II. Induced a client to cosign or make a loan, give a gift, or provide other benefits to the agent.

III. Held a seminar for prospective clients, calling it a seminar and sales presentation.

IV. Received a commission for purchasing a life insurance policy by using their power of attorney to buy the policy on behalf of their client.

A. I only B. II & IV only C. I, II & IV only D. I, II & III only

7. You decide to canvas a local retirement village for potential annuity clients.

You attend a tenant meeting at the clubhouse and tell the residents that you doing occupational research for your public health dissertation and ask each of them what they did for a living. From this information, you are able to cull a list of seniors with high potential savings and investment potential, whom you later contact about annuities. This practice is called: (Lesson 9, Bait and Switch)

A. Bait and switch.

B. Pretext interviews.

C. Trust mills.

D. Unnecessary replacement.

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8. Which of the following would describe the dictum of reasonable expectations as applied to contract ambiguities? (Lesson 9: Appropriate Advertising)

A. The expectations that the agent has towards the contract.

B. The view a rational third party would take towards the contract.

C. The returns that the contract holder expects from the insurance company.

D. Reasonable arbitration rules used to solve conflicts between the company and the contract holder.

9. Any entity or person is guilty of financially abusing an elder if: (Lesson 9:

Prohibited Sales Practices)

A. The agent asks the senior to replace an annuity without substantial benefits.

B. The company or the agent retains part of the annuity payment for wrongful use.

C. The company uses illegal advertising methods to induce the client to invest.

D. The company or the agent decline to let the client invest in annuities even though the client has sufficient funds.

10. If a senior is solicited for annuities with an in-house notice, they will be provided at least a _______ notice. (Lesson 9: In-Home Sales Presentations)

A. 24 hour B. 48 hour C. One week D. One month

Selling Annuities to Seniors 129

Quiz 9 Answers

1. (D) For all practical purposes, the courts have traditionally seen any contact with a financial client as advertisement. In today’s world, agents can interact with clients in a variety of way where the nature of the contact can be ambiguous, such as by email or the internet, which are considered as an advertisement. All communications using such means should be done in good faith and with due diligence so as not to violate the law.

2. (A) Generally, it is recommended that people whose assets are worth more than $100,000 should look into trusts and seek the advice of a reputable attorney or a qualified financial advisor.

3. (D) If you plan to contact the senior after sending them informational material, that fact must be disclosed to the senior citizen along with the marketing

materials sent to them.

4. (B) The Commissioner shall assess penalties against insurers, agents and other persons involved in actions which violate these rules, and court may also assess the penalties. After the hearing, the Commissioner will make a decision within another 30 day period and announce any penalties that the concerned party needs to make towards the Insurance Fund.

5. (D) Envelopes, business cards and stationery and anything else that could be considered an advertisement all require written approval before they can be used for annuity sales to seniors.

6. (D) The Commissioner can revoke or suspend a permanent license issued to an agent if the Commissioner finds that the agent has committed any of the following acts: inducing a client to cosign or make a loan, give a gift, or provide other benefits to the agent; inducing a client to make the agent a beneficiary in any annuity policy or trust established by the client; or receiving a commission for purchasing a life insurance policy by using their power of attorney to buy the policy on behalf of their client.

7. (B) A pretext interview is an interview where an agent or a representative commits any one of the following infringements: present themselves as someone they are not (public health PhD student); falsely represent a person or company;

mislead the other party as to the true nature of the interview (gathering academic data vs. canvassing for clients); does not reveal their identification when


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8. (B) Ambiguities in contracts of annuity are commons since they are complex products with contracts that can go on for several pages. When the ambiguity in a contract leads to a conflict that has to be resolved in court, the judges will normally refer to the reasonable expectations dictum, which how would a reasonable person see the benefits being offered.

9. (B) Any entity or person is guilty of financially abusing an elder if they take or retain the property of a senior citizen for wrongful use or with an intention of defrauding the senior. Replacement of an annuity without need is considered churning, while using non-approved and illegal advertising methods is wrongful advertising. The decision to not let an investor buy annuities can depend on factors other than the client having money, and may be in the best interest of both the senior and agent.

10. (A) The true mission or objective of the in-home meeting must not be

misrepresented to the senior under any circumstances. If a senior is solicited for annuities with an in-home visit from the agent or broker, the senior must be given at least a 24 hour notice that a visit shall be made. If the senior has an existing relationship with the agent and requests a meeting on the same day, a notice written in at least a 14 point type will be provided.

Selling Annuities to Seniors 131

In document Selling Annuities to Seniors (Page 124-131)

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