Filling out the annuity application
Few people enjoy filling out paperwork. Yet most of our major financial transactions — home mortgages, college financial aid, life insurance, tax filings — require pages and pages of forms to fill out.
Annuity applications are not near as cumbersome as those other types. There is no underwriting involved with annuities, so you don’t have to answer health questions. And because you’re not borrowing money, there are no credit forms.
Most annuity applications are just a few pages with basic information requested. As long as you have the information ready, you should be able to complete the application in about 30 minutes or less.
Even though it’s relatively simple, many insurance companies report that applications are often submitted with mistakes or incomplete information. When this occurs, it delays issuance of your contract. If your agent fills out the form, make sure he or she fills in all requested information accurately.
Agents also sometimes err because they use the wrong forms. Because insurance laws differ among states, insurance companies may have specific application forms for some states. If an agent does business in multiple states, he or she may mistakenly use the wrong state’s application.
Most insurance companies also have different applications based on the type of product being applied for (i.e. fixed annuity, variable annuity, etc.) and agents can grab the wrong one for your business.
Here is an overview of the information you will likely need to provide on the annuity application:
Biographical information. The application will request your name, address, date of birth, Social Security number, and marital status.
Spouse information. If you are purchasing a joint annuity — in which payouts continue until the death of both annuitants — you will need to provide the above information for your spouse as well.
Proof of identity. You will need to provide a birth certificate, driver’s license, passport or another acceptable form of identification.
Owner and annuitant. The application will ask will own the annuity and who will receive the income payments. In many cases this will be the same person and you only need to provide the information once.
Beneficiaries. In cases when some portion of the annuity value can be passed on after your death of there’s a actual death benefit, you will need to designate primary and contingent beneficiaries. Contingent beneficiaries receive death benefits if the primary beneficiary(s) die before the annuitant.
Source of premium. You will need to indicate where the funds are originating to fund the annuity, such as a rollover from a retirement account, a transfer from a money market account, or cash.
Plan type. The application will ask whether the annuity will be non-qualified or if it will be an IRA transfer, IRA rollover, SEP IRA, SIMPLE IRA, Roth IRA or Roth Conversion IRA
Existing life insurance and annuity contracts. You will need to provide information on your current annuity and life insurance policies, if applicable. If you are using funds from those contracts to purchase the new annuity, you will need to provide the company that issued the current contract, the policy number, and whether you are executing a 1035 exchange.
If you are funding your new contract through a 1035 exchange, there is usually a separate form that must be completed with information on your current contract.
Premium allocations. If you are purchasing a variable annuity, you will need to indicate how you want to invest your premium among the sub accounts offered by the insurance company. If you are purchasing an indexed annuity, you will need to allocate percentages of your premium among the different crediting strategies offered by the product.
Trust ownership forms. If the annuity will be owned by a trust, a separate form will need to be completed with information about the trust, including identity of the trustee.
Tax forms. If you will be receiving immediate income, you will need to fill out tax forms so that the insurance company can report taxable income. If you are deferring income, you won’t have to complete those forms until you begin receiving income.
In addition to filling out the application form, your agent may also provide you with additional documents during the buying process. Examples include:
Statement of understanding or certificate of disclosure. This is a detailed description of the contract’s features and provisions. Some of the information contained in this document include:
- Surrender charge schedule and percentages
- How the annuity’s value is determined
- Income options
- How the payout rate is determined
- Optional benefits and their cost
NAIC Annuity Buyer’s Guide. Many states require that agents provide at the time of sale the National Association of Insurance Commissioners Annuity Buyer’s Guide. This is a booklet that explains the basics of annuities in general to help buyers better understand the products.