What Is Suitability? Definition | Epic Life Glossary

Why it matters

To judge suitability, agents collect facts such as income, age, assets, and goals. They then recommend a product that makes sense and keep records of why. A product that is fine for one person can be a poor fit for another, for example when surrender charges tie up money someone may need soon. Rules vary by state and product. Families should be honest in answers and can ask for the reasoning behind a recommendation.

Source: naic.org

Where we use this term

Annuities explained: fixed, fixed-index, MYGA, income riders and surrender charges

Related terms

Best Interest Standard: The best interest standard is a rule from the NAIC annuity model regulation. It requires agents to act in the consumer's best interest when recommending annuities, and not put their own pay first.
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.
Surrender Charge: A surrender charge is a fee an insurer charges if you withdraw more than the allowed amount from an annuity, or cancel the contract, during the surrender period. It is usually a percentage that declines each year.
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.
Needs Analysis: A needs analysis is a review of a family's finances to find how much life insurance is needed. It looks at debts, income, expenses, assets, and goals.

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Why it matters

Where we use this term

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