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An annuity prospectus is a document that provides an overview of a variable annuity contract, including details, costs, and benefits, to help consumers make informed decisions. It includes information on investment options, fees, and financial highlights. The SEC requires that it be provided to potential customers, and any changes must be communicated to current contract holders. Fixed annuity contracts are not regulated by the SEC, and prospectuses are less common. The document can be lengthy, but it is important for buyers to review it before making a purchase.
An insurance company that sells variable annuities must provide an overview of the contract, called an annuity prospectus, to all potential customers. Helps clients understand the details, costs, and available benefits of a variable annuity contract. The purpose of an annuity prospectus is to help consumers make an informed decision regarding the purchase of a variable annuity. Fixed annuity prospectuses are less common, and detailed information is generally provided to consumers in other formats.
A variable annuity prospectus typically includes the optional riders that can be purchased with the contract, information about fees and other expenses charged to the contract holder, investment options, and financial highlights. Financial highlights generally include the total funds allocated to each investment option and its past performance. Instructions for withdrawing and moving funds between investment options are usually included in the prospectus as well.
The different investment options in a variable annuity contract are called subaccounts. These subaccounts are similar to mutual funds and the returns are tied to the stock market. The annuity brochure includes detailed information on all of the subaccounts available with a particular annuity. This information includes the investment objective, fund manager, investment style, and shares held in each sub-account. Typically, a low-risk fixed investment option is included, such as a money market account that is not directly linked to stock market performance.
In the United States, variable annuity contracts are registered securities products that are regulated by the Securities and Exchange Commission (SEC). It is the SEC that requires an annuity prospectus to be provided to consumers prior to the purchase of the variable annuity contract. The prospectus can be delivered in hard copy and mailed or delivered to the customer. It can also be published on a company’s website where the customer can easily access and print it.
The SEC also requires all owners of variable annuity contracts to be informed of any changes regarding the investment options available. When changes are made to an annuity prospectus, the issuing insurance company sends an update, or supplement, to all current variable annuity contract holders. All supplements must also be provided to new customers along with the brochure, until revised brochures are provided by the issuing insurance company.
Fixed annuity contracts are not securities products. As a result, they are not regulated by the SEC. Although a prospectus is not usually required, some insurance companies do issue fixed annuity prospectuses. Other insurance companies provide detailed fixed annuity contract information in a brochure or other format.
An annuity prospectus is generally a long document. It is not uncommon for a prospectus to be over 100 pages long. Potential buyers of variable annuities can review all information about the annuity contract and make sure the contract fits the buyer’s investment objectives. People can also rely on their investment advisors to review this information and choose the variable annuity that best suits their investment needs. In this case, the prospectus must be available to the person who actually purchases the variable annuity contract.
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