What Is Best Interest Standard? Definition

Why it matters

The NAIC revised Model #275 in 2020 to add this standard. Most states have adopted a version of the model, but details differ by state. Agents must show care, disclose conflicts, keep records, and base advice on the consumer's needs. The model focuses on annuities, though some states apply similar ideas to life insurance. Families can ask an agent why a product fits and what the agent earns.

Source: naic.org

Related terms

Suitability: Suitability is the requirement that an insurance recommendation fit the buyer's financial situation, needs, and goals. Many states apply suitability rules, especially to annuity sales.
Needs-Based Selling: Needs-based selling is a sales approach that starts by learning the family's goals, budget, and risks, then matches a product to those needs. The product is chosen after the questions, not before.
Fixed Indexed Annuity (FIA): A fixed indexed annuity (FIA) is an annuity that credits interest based in part on the performance of a market index, with a minimum guarantee. The owner does not invest directly in the index.
Replacement Regulation: Replacement regulation is a set of state rules that apply when a new life insurance policy or annuity replaces an existing one. Agents must give disclosures and notify the old insurer.
State Insurance Code: A state insurance code is the set of laws that govern insurance in a state. It covers licensing, policy terms, advertising, claims handling, and consumer protection.

All 241 terms

Why it matters

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