Questions to ask an agent before you sign an annuity application

An annuity application is a short form attached to a long contract. By the time you reach the signature line, the decisions that matter most have usually been made in conversation, and what the agent said is not binding unless it is also written in the contract. The questions below are meant for that conversation. For each one there is a note on what a good answer sounds like and which page of the contract can confirm it.

You do not need to ask all of them. Pick the groups that match your worry. If money access is your concern, start with liquidity; if you are moving money out of another contract, jump to the replacement group. And keep one habit throughout: ask for the answer on paper, and compare it with the contract specimen, the sample contract the insurer will send on request, before you sign.

How to use these questions

Bring a pen and a copy of the specimen. A specimen is the unsigned contract form, including the schedule or data pages where the numbers go. It contains the fine print that a brochure leaves out. If the agent cannot provide one before you sign, that is itself an answer.

Write each answer and the agent's name and date next to it. If a spoken answer differs from the contract, the contract controls. A good agent will welcome the process, because the questions usually prove the sale was careful.

For the rules that say what the agent must do, see best interest rules for annuity sales. For the fee types in general, see annuity fees, explained.

Questions about access to your money

1. How long am I locked in, and what does it cost to leave early?

A good answer gives a number of years and a schedule, such as a percentage that declines each year, and says whether the charge applies to withdrawals above a free amount or to a full surrender. Confirm it on the surrender charge schedule page. The mechanics are in annuity surrender charges and free withdrawals.

2. How much can I take out each year without a charge?

Most deferred contracts allow a limited free withdrawal, often stated as a percentage of the account value or of the premium. A good answer gives the percentage, says whether it is cumulative or use-it-or-lose-it each year and names what counts toward it. Check the withdrawal provision. Ask also whether taking the free amount reduces any guaranteed benefit, because some income riders treat early withdrawals as excess withdrawals.

3. Is there a market value adjustment, and which way can it move?

A market value adjustment changes the amount you receive on an early exit depending on how interest rates have moved since you bought. It can reduce your payout or, in some designs, raise it. A good answer says whether the contract has one, what triggers it and whether there is a floor. If the agent says "no, it only helps you," ask to see the clause.

4. What happens if I need the money for a nursing home, a terminal illness or a death?

Many contracts waive surrender charges for confinement to a care facility or a terminal diagnosis, but the conditions and waiting periods vary. A good answer names the rider or provision and its conditions. Confirm it in the contract's waiver wording. Also ask what the beneficiary receives if you die in the early years, which leads to the death benefit question in the guarantees group.

5. How much of my savings is going into this?

This one is for you rather than the agent. A common caution is to keep emergency money and money needed in the next several years outside a contract with a surrender schedule. A good agent will ask about your other assets before recommending an amount. If the conversation never touches what else you have, you may be hearing a pitch rather than a recommendation.

Questions about costs

6. What does this contract cost me each year, all in?

Ask for every recurring charge: contract or administrative fees, mortality and expense charges on a variable contract, fund expenses, rider charges and any advisory fee. A good answer adds them together into a percentage and a dollar amount for your deposit. Confirm it on the fee schedule and the prospectus if the contract is a security. Adding them up in dollars is the best test.

7. How is the seller paid on this sale?

A good answer states whether it is a commission from the insurer, a fee from you or both, and in what amount. You are entitled to ask, and the best-interest rules in most states require the agent to disclose the type of compensation. If you want the background on how pay can shape a recommendation, read how annuity commissions shape the advice you hear.

8. Is there a bonus, and how is it paid for?

If a premium bonus is offered, a good answer explains what you give up in exchange, such as a longer surrender schedule, a lower credited rate or a vesting rule that takes the bonus back if you leave early. Confirm it on the bonus provision. A bonus that appears in the sales material but not in the contract is a warning sign.

9. Can the insurer change any of the rates or charges after I buy?

On many contracts, credited rates, caps and participation rates are set for a period and then declared again. A good answer says what is guaranteed for the life of the contract (the minimum), what can change and when. Look for the minimum guaranteed values and any statement that current rates are not guaranteed. Do not rely on an illustration of the current rate continuing.

Questions about guarantees and income

10. Which numbers are guaranteed and which are only illustrated?

Sales illustrations mix guaranteed and non-guaranteed figures. A good answer separates them. Ask the agent to mark which lines are contractual minimums. Confirm each on the contract's guaranteed-values page. If a number is described as guaranteed, ask what it is guaranteed to be, since "guaranteed 7 percent" often refers to a benefit base used to compute income and not to money you can withdraw.

11. If there is an income rider, what is it based on and when can I use it?

A good answer states the starting date, the base the income is computed from, the payout percentage by age and any joint-life reduction. Confirm it on the rider page and the rider charge schedule. Ask whether the percentage can change if you start later, and whether withdrawals before the start date affect it.

12. If I want lifetime income, do I have to give up the lump sum?

Turning the contract into payments, called annuitization, usually ends your access to the lump sum, in exchange for a stream. Riders can provide lifetime income while leaving the account open. A good answer explains which route this contract uses and what is left for your heirs if you die early. Confirm it on the payout options page.

13. What does my beneficiary get if I die?

A good answer states whether heirs receive the account value, the premium paid minus withdrawals or an enhanced amount, whether the death benefit is reduced by withdrawals, and what happens to any income rider. See the death benefit section of the contract. Ask also whether a spouse can continue the contract. The options differ widely between contracts.

Questions about taxes

14. How will gains be taxed, and does it matter where the money comes from?

A good answer says that gains are generally taxed as ordinary income when withdrawn, that withdrawals from a non-qualified contract come out gains first, and that a 10 percent additional tax generally applies to gains withdrawn before age 59½, with exceptions. Hold the agent to the line between insurance and tax advice: a tax professional is the right source for your situation. The overview is at how annuities are taxed.

15. Is this money in an IRA already, and does the annuity add anything?

If the money is already in a tax-deferred account, the annuity adds no additional tax deferral. A good answer names what the annuity does add, such as a guaranteed income feature, and what it costs. If the only stated benefit is tax deferral, ask why. The guide Should you put an annuity in an IRA? lays out the reasoning on both sides.

16. Will this raise a required distribution or change my tax picture in retirement?

Contracts held inside an IRA are subject to required minimum distributions, with the starting age at 73 under current law and rising to 75 for those born in 1960 or later. A good answer acknowledges the rules and suggests you confirm the effect with a tax professional. If the agent has no idea, that is a reason to ask a tax adviser before the sale rather than after.

Questions about the insurer and its backstop

17. Who stands behind the promise, and how strong are they?

The contract is a promise from the insurer, not from the agent's firm or the bank that hosts the meeting. A good answer names the issuing company and its financial strength ratings with the agency and date. Verify the rating yourself at the agency or the insurer's profile page, not on a brochure. Ratings are opinions and change.

18. What protection do I have if the insurer fails?

Annuities are not covered by FDIC insurance. Each state has a guaranty association that pays up to a limit when an insurer is liquidated; according to NOLHGA (information as of June 1, 2025), the common annuity limit is $250,000 in present value per person per insurer, with some states higher. A good answer cites your state's limit and does not claim a federal guarantee. Use the state guaranty association coverage lookup to check your state.

Questions about replacement and paperwork

19. Is any of this money coming from another annuity or a life insurance policy?

If so, the agent should say so, and your state's replacement rules apply. A good answer compares the old and new contracts side by side: surrender charges you will pay or restart, benefits you will give up, any new bonus and what happens to taxes. A 1035 exchanges: swapping policies without tax can avoid immediate tax, but it does not remove surrender charges or restart waiting periods. Regulators call this replacement, and it is the area where sales-practice complaints cluster.

20. How long do I have to change my mind?

Ask for the free-look period in days, when it starts, how to cancel and what you receive back. The length varies by state, by age and sometimes by whether it is a replacement. Write down the delivery date, since many windows begin at delivery. The post what to do during the free-look window after buying an annuity turns the window into a plan.

21. Where will I find the contract once it is issued, and who do I call?

A good answer names the insurer's service line and how the contract is delivered. Ask for a printed copy and keep it with your beneficiary information. Store the agent's name and license number with it, since you may want to verify the license later.

22. Can I take the paperwork home and sign tomorrow?

The answer should be yes. A rate or bonus that expires the same day is a pressure tactic to be careful about. If there is a genuine deadline, ask for it in writing. If the agent resists giving you a day, treat that as information.

Before the meeting

A little preparation changes the quality of the answers. Write down, before the agent arrives, three numbers: the amount you could put in without touching your emergency money, the earliest date you might need any of it and the monthly income you hope the contract will provide, if any. These three numbers let you test every answer. If you plan to need money in six years and the surrender schedule runs ten, the mismatch is visible at once.

Also decide in advance what would make you walk away. Examples: a refusal to give the specimen contract, an answer on pay that changes between questions or a request to sign blank sections. Deciding ahead makes it easier to hold the line when the meeting is friendly and the agent is persuasive.

When the answers don't satisfy you

Some answers will come back vague, and some will conflict with the contract. Three steps help.

1. Ask again in writing. An email creates a record and often produces a more careful answer.
2. Get a second reading. A fee-only planner or an attorney can read the specimen for a flat fee and tell you what it says. They cannot decide for you, but they can read.
3. Do not sign until you can explain it. If you cannot say in two sentences how you get your money out, what it costs and what happens at your death, you are not ready.

If, after the sale, you find the contract differs from what you were told, the free-look window is the cheapest time to act, and the state insurance department is the next step. The process is described in filing a complaint about an annuity sale with your state regulator.

Key takeaways

• Ask for answers on paper and check each against the contract specimen; the written contract controls over any spoken promise.
• The most revealing questions are about the surrender schedule, free withdrawals, all-in yearly cost and what is guaranteed versus illustrated.
• Insist on knowing how the seller is paid, whether money is coming from another contract, and what the free-look period is.
• Annuities have no FDIC coverage; state guaranty limits apply, and your state's figure can be checked with the lookup tool.
• You may take the paperwork home, and a pressure deadline is a reason to slow down, not speed up.