South Carolina annuity questions focus on Regulation 69-29, South Carolina's version of the best-interest standard for annuity transactions. Replacement rules (Regulation 69-12.1) and the guaranty association also apply to annuities. How annuities work (types, phases, payout options, taxation such as Section 1035 exchanges) is in the national Annuities guide.

Best interest standard (Regulation 69-29)

The core duty

• A producer recommending an annuity must act in the consumer's best interest (Sec. V(A)).
• Care obligation: before recommending, the producer makes reasonable efforts to obtain the consumer's profile information (Sec. V(A)(1)(b)).
• The regulation creates a regulatory obligation. It does not make the producer a fiduciary (Sec. V(A)(1)(d)).

Training (Sec. VI(B))

• Before selling annuities, a life-licensed producer completes a one-time annuity training course of at least 4 hours.
• The insurer must confirm the producer finished the training before the producer sells its annuities.

Records (Sec. VIII)

• Insurers and producers keep records of the information behind an annuity recommendation for 5 years after the transaction.

Replacement

• Regulation 69-12.1 covers annuities as well as life insurance:
  • A signed statement on existing coverage with every application.
  • The replacement notice presented at application.
  • Notice to the existing insurer within 5 business days.
  • A 30-day right to return the replacing contract.
• Details are in the South Carolina Life Policy Provisions guide.

Taxes (federal)

• A Section 1035 exchange lets an owner exchange one annuity for another, or a life policy for an annuity, without recognizing gain.
• When an annuity is annuitized, the part of each payment that returns the owner's cost basis isn't taxable.

Guaranty protection

• The South Carolina Life and Accident and Health Insurance Guaranty Association covers the present value of annuity benefits, including cash values, up to $300,000 per life (38-29-40).
• The portion of a contract where the owner bears the investment risk isn't covered.
• Using the Association to sell is prohibited, and the summary document is delivered with the policy (38-29-200).

Common exam traps

• Best interest is not fiduciary in South Carolina.
• Training: 4 hours, once, confirmed by the insurer.
• Records: 5 years.
• Guaranty limit: $300,000 for annuities. South Carolina's annuity limit is the same as its life death benefit limit.