The national guide explains how annuities work:

• phases: accumulation and payout;
• types: fixed, variable and indexed; immediate and deferred;
• payout options, surrender charges and 1035 exchanges.

Idaho's state questions on annuities focus on the best interest standard (Idaho Code 41-1940 to 41-1940E), the training requirement, and the standard provisions required in annuity contracts (Idaho Code chapter 41-19).

National concepts in brief

• The annuitant is the measuring life; the owner controls the contract.
• Fixed annuities guarantee a minimum rate. Variable annuities put investment risk on the owner. Indexed annuities credit interest tied to an index, subject to caps.
• A 1035 exchange defers tax when one annuity is swapped for another.

Best interest standard

When recommending an annuity, a producer must act in the consumer's best interest. The producer may not put their own or the insurer's financial interest ahead of the consumer's (Idaho Code 41-1940A).

The four obligations:

1. Care. Know the consumer's situation and have a reasonable basis for the recommendation. Consumer profile information includes:

   • age, income, financial situation and experience;
   • objectives, intended use and time horizon;
   • existing assets, liquidity needs and liquid net worth;
   • risk tolerance, funding source and tax status (Idaho Code 41-1940(2)(d)).

   The care obligation does not require recommending the lowest-commission annuity, and it creates no duty to monitor the contract afterward.

2. Disclosure. Disclose:

   • the producer's role and licenses;
   • the insurers the producer represents;
   • the sources and types of compensation;
   • the consumer's right to ask for compensation details (Idaho Code 41-1940A(4)).

3. Conflict of interest. Identify and avoid material conflicts, or reasonably manage and disclose them.

4. Documentation. Record the recommendation and its basis.

Exchanges and replacements. The producer weighs:

• surrender charges and benefits lost;
• whether the consumer gains a substantial benefit;
• any other exchange in the past 60 months.

Records: insurers, agencies and producers keep best interest records for five years after the natural life of the contract (Idaho Code 41-1940E).

Training

• Producers who sell annuities must complete a one-time four-credit training course approved by the Department (Idaho Code 41-1940C).
• What the course covers:
  • annuity types and parties;
  • product features;
  • taxation of qualified and nonqualified annuities;
  • primary uses;
  • standards of conduct.
• It may not include sales techniques or one insurer's products.

Required annuity contract provisions

Other Idaho rules

• Creditor protection: annuity payments now due to an annuitant are exempt from creditors up to $1,250 a month. Amounts above that can be garnished like wages (Idaho Code 41-1836).
• Guaranty association: the Idaho Life and Health Insurance Guaranty Association protects annuity values up to $250,000 in present value (Idaho Code 41-4303). Producers may not use it as a sales tool.
• Replacement: the replacement rules apply to annuities too. The replacing insurer gives a 20-day refund right (IDAPA 18.03.04).

Common exam traps

• The annuity free look is 20 days.
• Annuity reinstatement runs one year, not the three years allowed for life policies.
• Best interest records are kept five years after the contract ends.
• The training course is four credits and contains no sales or product-specific content.
• The creditor exemption is $1,250 a month.