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An annuity is a financial product that provides a series of regular payments, typically for a fixed period of time or for life. It’s often used to generate income in retirement.
But before you finalize the terms of your annuity contract, you’re granted a special window to review the terms of your investment in more detail.
Each state insurance department sets its own minimum requirement for free look periods. In this article, we’ll explore each state’s standards so you can make the most of this time.
What is an annuity free look period?
A free look period is an important time frame provided by annuity companies to give prospective buyers the chance to carefully review their contract.
This period — typically lasting at least 10 days but varying by state — offers a final opportunity to determine if an annuity aligns with your financial goals. If you’re not satisfied with the contract, you can cancel it within this period and get a full refund.
Your free look period starts when you receive your annuity contract. To make an informed decision, start reviewing this document as soon as you receive it. Annuities can be complex, so consider seeking guidance from a lawyer, financial advisor or tax professional during your free look period.
Free look minimum requirements by state
How long you have to review your annuity contract depends on the state you live in. While insurance companies may offer you more time to review your contact, all companies must grant you at least the minimum number of days required by state law.
A majority of states give you 10 days to review the contract, and some offer more time to review a replacement annuity. Other states — 13 in total — only require insurers to provide you with a free look period if you weren’t given a buyer’s guide and disclosure documents prior to receiving the contract.
Here’s how annuity free look periods break down for each state.
|
State |
Free look minimum requirement |
|
Alabama |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Alaska |
10 days |
|
Arizona |
10 days. 30 days if the buyer is 65 years or older. |
|
Arkansas |
10 days |
|
California |
30 days |
|
Colorado |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Connecticut |
10 days |
|
Delaware |
10 days for a new policy. 20 days for a replacement policy. |
|
Florida |
21 days |
|
Georgia |
10 days |
|
Hawaii |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Idaho |
20 days |
|
Illinois |
10 days |
|
Indiana |
10 days |
|
Iowa |
10 days |
|
Kansas |
10 days |
|
Kentucky |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Louisiana |
10 days |
|
Maine |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Maryland |
10 days |
|
Massachusetts |
20 days |
|
Michigan |
10 days |
|
Minnesota |
10 days for a new policy. 30 days for a replacement policy. |
|
Mississippi |
No legal requirement. |
|
Missouri |
10 days |
|
Montana |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Nebraska |
10 days |
|
Nevada |
10 days for a new policy. 30 days for a replacement policy. |
|
New Hampshire |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
New Jersey |
10 days |
|
New Mexico |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
New York |
10 to 30 days |
|
North Carolina |
10 days for a new policy. 30 days for a replacement policy. |
|
North Dakota |
10 days |
|
Ohio |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Oklahoma |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Oregon |
10 to 15 days for a new policy depending on when an annuity buyer’s guide and disclosure document is provided. 30 days for a replacement policy. |
|
Pennsylvania |
10 days for a new policy. 20 days for a replacement policy. |
|
Rhode Island |
20 days |
|
South Carolina |
10 days. 30 days if the annuity is sold by mail order. |
|
South Dakota |
10 days |
|
Tennessee |
10 days |
|
Texas |
20 days for a new policy. 30 days for a replacement policy. |
|
Utah |
10 days for a new policy. 30 days for a replacement policy. |
|
Vermont |
No legal requirement. |
|
Virginia |
No legal requirement for new contracts. 10 days for replacements. |
|
Washington |
10 days |
|
West Virginia |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
|
Wisconsin |
30 days for a replacement policy. |
|
Wyoming |
15 days. Free look period is only granted if the insurer fails to provide an annuity buyer’s guide and disclosure document at or before the application is submitted. |
Why is an annuity free look period important?
The free look period is your last chance to evaluate an annuity and cancel the contract before the terms become legally binding. After the period ends, canceling or withdrawing can result in hefty surrender charges and penalties.
The free look period is designed to protect you and your financial interests. That’s important because some annuities require large up-front investments on your part. Immediate annuities, for example, are relatively simple and straightforward, but may require a lump sum of $100,000 or more to generate meaningful income in retirement.
Meanwhile, variable annuities may allow for a series of deferred payments over time, but the contract language and how the annuity generates returns can be extremely complicated. Many variable annuities are packed with fees and qualifying terms, so you may need a few days to thoroughly review it.
Finally, regardless of the type of annuity, it’s generally very difficult to get your money out once you begin receiving payments from the insurer.
While you may be able to withdraw a small portion of the principal each year at no cost, you can’t easily liquidate the annuity like you can with stocks or other investments in your brokerage account. Not only will you pay ordinary income taxes on some or all of the money you withdraw, you’ll also get slammed with surrender charges or withdrawal penalties, making it not only challenging but expensive to access your money.
The free look period is important because you want to make sure buying an annuity is the right fit for your finances in retirement. Otherwise, you could get stuck in an investment you don’t understand, or that doesn’t provide the benefits you thought it would.
Bottom line
The free look period offers extra time to carefully examine an annuity contract and make an informed decision. If you’re unsure about anything, don’t hesitate to contact the insurance company, or seek professional help from a financial advisor. There aren’t many second chances in finance, so use this time wisely and make sure the annuity truly meets your needs.
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