Ready to Buy an Annuity? Here’s How the Process Works
Ready to buy an annuity? You probably have a whole host of questions about how the process works from here. So here are the next stages in the process.
Keep in mind that the process to buy an annuity will vary slightly from insurer to insurer and we’re working hard every day to make the process faster, more digital and more smooth. But, for now, what’s described below applies in the majority of cases.
Note: This article focuses exclusively on the process after you’ve decided what kind of annuity and insurer to go with. If you’re not yet at the point, we suggest reading our Annuity Decision Guide.
A Second Note: There are a few technical terms that are important to understand as part of the process to buy an annuity. Those terms are Illustration, In Good Order, 1035 Exchange, and Free Look Period and we’ve called out each of those below by italicizing them every time they appear.
Locking in the Rate
You’ll need an Illustration to lock in the payout that you see. Typically, Illustrations can be downloaded directly from our site, or we’d of course be happy to do this for you. The Illustration is confirmation that, assuming the application is accepted In Good Order by the insurer before the Illustration’s expiration date, you’ll be able to lock in the payout rate from the Illustration while the funds are transferred.
Applications to buy an annuity seem more daunting than they actually are. We work with most customers to process their application digitally (assuming the insurer permits this).
When you request or when the insurer requires it, we’ll do the application over the phone and mail it to you for signature. If it’s a paper-based process, we’ll collect all the information we need in a short 10 minute call, then send you the application in the mail for you to confirm all the details and sign, then send directly to the insurer (or the entity that processes business on behalf of the insurer) with the postage paid for and labels provided by us. And, of course, if there’s ever sensitive information that you prefer to provide directly, we’ll provide instructions that accompany the application stating exactly where that information needs to go.
In the case of a 1035 Exchange or qualified transfer (more on these below), you’ll typically need to sign at least the form used to request funds from the transferring entity.
Policy Acceptance, Funding and Transfer
Once an application has been submitted to the insurer, it’s important to get a confirmation that the policy is In Good Order before the expiration of the Illustration in order to get rate lock. Once the policy is accepted In Good Order, the funds are requested, or if the funds have been included with the application, the funds are cashed.
There are basically three types of ways annuity policies are funded: 1035 Exchange, qualified transfer or cash/check.
- 1035 Exchange: A 1035 Exchange occurs when you’re funding an annuity using proceeds from an existing annuity or life insurance policy. There may be specific requirements from the insurer or forms to fill out. We’ll tell you honestly — these are usually the trickiest types of transfers. But fear not — we’ll work with you every step of the way to figure it out.
- Qualified Transfer: This is the majority of the business we do. A qualified transfer would happen if you were transferring money from an IRA at Charles Schwab, for example, to an IRA at the insurer that will hold your annuity policy. If you’re doing a qualified transfer, you’ll need to sign a form in the application that authorizes the insurer to request these funds on your behalf. In some cases, we may ask you to call the transferring entity to confirm receipt and that all requirements to process the change have been met.
- Cash/check: This is the simplest process. If you’re buying a non-qualified policy and funding it with cash/check, you can reasonably expect a policy to usually be issued within 1-2 business days from when the application is accepted In Good Order.
Once the funds have been received by the insurer, the policy is typically issued within 1-2 business days. After that it can take 5-7 business days for the insurer to mail us the hard copy of policy. We’ll then check it over and confirm everything matches the Illustration and then send it to you. In a few states, the insurer will send the policy directly to you.
Policy Receipt and Free Look Period
Once you receive the policy, you’ll usually need to sign a short form confirming receipt. Depending on the state you live in, the Free Look Period can last anywhere from 10-30 days. Think of this time as similar to the “free return period” for that pair of jeans you bought. Rejecting a policy doesn’t happen often, but it’s important to know you have the ability do that during the Free Look Period.
Making Changes Post-Purchase
Contact us to change an address, a beneficiary, your tax withholding, or something else. We’ll make the process as seamless as possible. For some clients, we’re beta testing a digital process to make these changes online and will be rolling that out that functionality to all clients in the near future. And, of course, you can always contact the insurer directly if you prefer.
So that’s it. We estimate that, in total, this should all take less an hour of your time. Getting from “I want to buy an annuity” to “I have a policy in hand” hasn’t always been this easy. But now, with Blueprint Income, it is. And there are plenty more improvements on the way. Stay tuned!
- Run your annuity quotes using our free, real-time Quote Tool.
- Click on the quote you like.
- Click to request an application, and let us help you from there.
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