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Variable Annuities -
Prospectus |
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Variable annuities are considered securities and must be registered with the SEC. The SEC requires that all variable annuity sales materials include a prospectus, which contains all of the relevant information regarding the contract. While not a terribly appealing marketing document, the prospectus is a valuable tool for the professional. A thorough review of this document will reveal any hidden charges not clearly defined in the supporting marketing materials. The prospectus outlines all costs and benefits, defines terms, discusses the issuer and likely gives the potential contractholder more information than he or she wants to digest at any one time. However, used properly, the prospectus can be an effective sales tool.
As valuable as a prospectus is, most consumers find these documents difficult to understand. In an effort to ease the confusion caused by both the length and wording of the prospectus, the SEC now allows an insurer to provide a “Profile” along with the regular statutory prospectus. The Profile, approved on a trial basis in 1996, is an extract of the important information contained in a prospectus, designed to summarize and explain essential points in a way that is understandable by the average investor. It will also enable consumers to more easily compare variable annuity products. The overwhelming sentiment is that as a result of the Profile, consumers will be better informed and more knowledgeable about the products they’re purchasing.
To create and use a Profile, companies must conform to a set of guidelines created by the National Association for Variable Annuities (NAVA) which was instrumental in the development of the Profile. The Guidelines for the Variable Annuity Profile describe certain disclosure items that must be included in the Profile, including information about the annuity contract, annuity payments, purchases, investment options, expenses, withdrawals, performance and death benefits. The order in which these items must appear is specified in the Guidelines and the content of the Profile is limited to that set forth in the Guidelines.
Extracted from “Annuities” 2nd edition by Thomas F. Streiff, CFP, CLU, ChFC, CFS and David Shapiro, CFP, CLU, ChFC
Features will vary by company and product. Please refer to
Glossary for definitions
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