Annuities, Part 1: Where Can You Buy an Annuity?

Let’s say you decide that you want to purchase an annuity. What is your next step? Where do you go?

That’s the question I wanted to answer for myself. This article answers the questions:

  • Which companies can issue annuities?
  • How can you verify an insurance company is properly licensed?
  • Where else can you buy annuities?
  • Who can sell you an annuity?

Let’s get to it.

Which companies can issue annuities?

The answer to this is actually very straightforward. That is, insurance companies can sell annuities. Plain and simple. There are many sources that make this incredibly clear.

1. Securities and Exchange Commission (SEC): The SEC was created as part of the Securities Exchange Act of 1934 and is part of the US Federal Government. The SEC’s mission is to “protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.” They have an entire page dedicated to annuities, in which they state “An annuity is a contract between you and an insurance company…”

2. Financial Industry Regulatory Authority (FINRA): FINRA is a “not-for-profit organization authorized by Congress to protect America’s investors.” They too have an entire page dedicated to annuities, that states “An annuity is a contract between you and an insurance company…”

3. National Association of Insurance Commissioners (NAIC): The NAIC is “the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories.” They also have an entire page dedicated to annuities, which states “An annuity is an insurance contract sold by insurance companies.”

These 3 very credible sources use almost identical language, and all clearly state that insurance companies are who sells annuities. 

How can you verify an insurance company is properly licensed?

According to another page on FINRA’s website, “Every state, along with the District of Columbia and U.S. territories, has an insurance commission that licenses the insurance agents and insurance companies who do business in that jurisdiction.”

That means that an insurance company must be licensed in each state it wishes to do business in. If an insurance company wants to do business in all 50 states, it must be registered in all 50 of those states. And if you want to purchase an annuity, you should make sure that company is licensed in your specific state.

Luckily, the NAIC has a page that allows you to choose your state from a map and go straight to that state’s insurance website. Most state’s websites allow you to easily verify if a company is licensed to do business in that state. For example, I have lived in California and New York. You can search for insurance companies licensed to do business in CA here, and NY here.

Where else can you buy annuities?

So insurance companies are who can sell annuities. But I often hear of other companies trying to sell annuities also. How can they do this? It turns out there are 2 common strategies I identified that companies use when they wish to sell an annuity, but are not an insurance company.

  1. Create a subsidiary that is an insurance company
  2. Partner with another company that already is an insurance company

Below are 4 real-life examples of companies using the above strategies.

1. Banks: Chase is a large bank that many of you have probably heard of. Chase created a separate company called “Chase Insurance Agency, Inc. (CIA)” which is an “affiliated company under the common control of JPMorgan Chase & Co.” If Chase wants to sell annuities, they “are made available through Chase Insurance Agency, Inc. (CIA)” Below is a screenshot of the footer of their website page discussing this.

2. Mutual Fund Providers: Fidelity is a large mutual fund provider. They also created a separate company called “Fidelity Investments Life Insurance Company (FILI)” which you can see referenced in the footer of their website. And if Fidelity wants to sell an annuity, it will be “issued by Fidelity Investments Life Insurance Company (FILI).”

Another large mutual fund provider, Vanguard, took a different approach. Instead of creating their own insurance company, they decided to partner with an existing one; Transamerica. Again, this information is all listed in the footer section of their website, which states “the Vanguard Variable Annuity is issued by Transamerica Premier Life Insurance Company.”

3. Brokerage Firms: Charles Schwab is a large brokerage firm. They decided to partner with 3 insurance companies (New York Life, MassMutual and Midland National) to offer annuities. But as their website states, these annuities are “issued by leading insurance companies that are not affiliated with Schwab.”

4. Financial Advisers: United Capital is a large financial advisory firm. Per their ADV, if one of their advisors wants to sell an annuity, he/she can do so under “United Capital Risk Management (“UCRM”), an insurance agency.” An insurance agency is like an insurance broker, meaning they can pick and choose from many annuities.

These 4 examples show you that there are many places to purchase an annuity. You might even be able to purchase an annuity from a company you wouldn’t think of as an insurance company at all.

Who can sell you an annuity?

Knowing which companies can issue annuities is important. But most annuities are not purchased directly from a company, and are instead purchased through a person who works for an insurance company. These individuals go by many names (insurance agent, insurance salesperson, broker, financial advisor, etc.). You should also be aware of who can legally sell you an annuity.

Each state has its own rules, so you should research your specific state before purchasing an annuity. But there are some general guidelines that you can use as rules-of-thumb. An annuity salesperson must usually have a valid life insurance license in your state, and may, depending on the type of annuity, also need a securities license.

Insurance License: Again, according to a page on FINRA’s website, “Every state, along with the District of Columbia and U.S. territories, has an insurance commission that licenses the insurance agents and insurance companies who do business in that jurisdiction.” So the annuity salesperson usually must have a life insurance license in your state. Below are examples again from California and New York, the 2 states I have lived in.

California’s Department of Insurance website states “generally, the Life-Only license allows authority to transact insurance products providing coverage on human lives including benefits of endowment and annuities.” To me this implies that you must have a CA life insurance license to sell an annuity in CA. They also have a page that allows you to lookup and verify for yourself that the salesperson has a life insurance license.

The New York Department of Financial Services website states “agents and brokers licensed by the New York State Department of Financial Services are required to be competent and trustworthy. Make sure that the agent or broker is licensed in good standing with the Department.” Again, to me, this implies you must have a NY life insurance license to sell an annuity in NY. They too have a page that allows you to lookup and verify for yourself that the salesperson has a life insurance license.

Securities License: In addition to a life insurance license in your state, “if an insurance agent offers products that are considered securities—such as variable annuity contracts or variable life insurance policies—the agent must also be licensed as a registered representative and comply with FINRA rules” (FINRA). That means they must have either a

You can verify someone is a registered representative by searching them on BrokerCheck.

So if someone wants to sell an annuity in your state, they usually must have a valid life insurance in your state. If they want to sell a variable annuity, they usually must also have a securities license.

Note that just because an advisor recommends an annuity to you doesn’t mean he/she will be the person selling it to you. For example, if you are a fee-only financial advisor, you don’t take commissions, and thus likely do not sell annuities yourself. However, if you think it makes sense for somebody, you may recommend they get one, and refer them to somebody else who does meet the licensing requirement to sell you an annuity. Your advisor would charge you for the advice, but not receive a commission for actually selling you the annuity. This means that your advisor may not have these licenses, but the person who ultimately sells you the annuity should.

Conclusion

Annuities must be issued by insurance companies. Many companies you wouldn’t think of as insurance companies either create subsidiaries or partner with existing insurance companies so that they too can sell annuities. 

Individuals who work for these companies usually must have a valid life insurance license to sell an annuity. If they sell variable annuities, they usually must also have a securities license. 

I hope this was helpful in your annuity search.

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