What Is an Annuity Free Look Period?

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DEFINITION

The free look period is a set time during which purchasers of annuities can walk away from the transaction penalty-free, with no reason required. Each state sets the length of the period.

The free look period gives you a period where you can walk away from buying an annuity penalty-free, with no reason required. Each state sets the length of the period.

Definition and Example of a Free Look Period

The free look period for an annuity is a period after the purchase in which you can cancel it without facing any penalties. Free look periods usually last at least 10 days after purchase, depending on state law.

The free look provision is designed to give prospective annuity customers a way to protect themselves from predatory sales practices. In the past, agents were paid commissions for selling annuities. That led them to adopt sales practices that were not in the best interests of their clients. States began regulating annuity sales in 2003, and regulations have been evolving. Nearly half of states have implemented or plan to implement the National Association of Insurance Commissioners' Best Interest Rule, which requires agents to act in their clients' best interests.

How the Free Look Period Works

The free look period starts when the annuity policy is delivered to you. Some carriers require you to sign an actual delivery receipt, but the clock starts as soon as you get the policy. Days counted are calendar days—not business days—so Saturday and Sunday are included.

When the policy is delivered, it's best to call the carrier to verify how the annuity works and to confirm any promises made during the sales process. Don’t call the sales agent; call the annuity company directly. The company’s toll-free number will be on the policy, so if you find out that the guarantees don’t match the sales pitch, you can enact the free look policy right on that call.

The best part about the free look provision is that you do not have to explain why you want a full refund. You never have to speak with the sales agent. There might be a form to sign (depending on the carrier), but the customer service people at the carrier may not try to talk you out of it. As long as you follow the time-frame rules, you will get your money back.

The National Conference of Insurance Guaranty Funds (NCIGF) provides links to each state's insurance guaranty association and can also offer a detailed contact list.

The annuity-free look provision is the consumer’s friend and can bring you peace of mind. It is possible to be up-sold into an annuity you don't need. Think of it as your "get out of an annuity-free" card. It gives you time to continue shopping or have a lawyer or financial adviser review your contract.

The free look period follows the state guidelines outlined in the following table.

State Requirements for Free Look Periods
State Free Look Period Requirements
Alabama 15 days in some circumstances; 30 days for replacement contracts
Alaska 10 days for new policies; 30 days if you need a replacement contract
Arizona 10 days standard; 30 days if you're 65 years old or older
Arkansas 10 days in some circumstances
California 10 days standard; 30 days if you're 62 or older
Colorado None required by law
Connecticut  10 days
Delaware 10 to 15 days
Florida 14 days standard; 21 days if you're 60 or older
Georgia 10 days
Hawaii  10 days standard; 15 days in some circumstances
Idaho 20 days
Illinois 10 days 
Indiana 10 days
Iowa  10 days standard; 15 days in some circumstances
Kansas 10 days
Kentucky 10 days standard; 30 days if you need a replacement contract
Louisiana 10 days
Maine 15 days in some circumstances
Maryland 10 days
Massachusetts 20 days
Michigan 10 days minimum
Minnesota 10 days with a new policy; 30 days if you need a replacement policy
Mississippi None required by law
Missouri 10 days
Montana 15 days in some circumstances
Nebraska 10 days
Nevada 10 days with a new policy; 30 days if you need a replacement policy
New Hampshire 10 days
New Jersey 10 days
New Mexico 15 days in some circumstances
New York 10 to 30 days
North Carolina 10 days standard; 15 days in some circumstances
North Dakota 20 days
Ohio  10 days standard; 15 days in some circustances; 30 days if you need a replacement policy
Oklahoma 20 days
Oregon 30 days for replacement policies
Pennsylvania 10 days
Rhode Island 20 days
South Carolina 10 days standard; 20 days if you need a replacement; 30 days if you're solicited and accept the policy
South Dakota 10 days
Tennessee 10 days
Texas  20 days standard; 30 days if you need a replacement contract
Utah 10 days standard; 30 days if you need a replacement contract
Vermont  None required by law, but 10 days is standard
Virginia 10 days if you need a replacement contract; no requirement by law for new contracts
Washington 10 days with a requirement to issue a refund within 30 days
West Virginia 10 days minimum
Wisconsin 30 days if you need a replacement contract; no requirement by law for new contract
Wyoming  30 days if you need a replacement contract; no requirement by law for new contract

What It Means for Your Retirement

Many people experience buyer's remorse after purchasing a financial product.

An annuity is a significant financial commitment. It is an excellent retirement solution for some people; for others, it might not be the best solution—the free look period is your state government's way of giving you time to think about it and ensuring that you're not being taken advantage of by commission-driven sales tactics.

Key Takeaways

  • The free look provision gives annuity buyers a chance to back out with no penalty.
  • It generally extends from 10 to 30 days, depending on your state's laws.
  • You're not required to give a reason, to get your money back.
  • The provision is a counterbalance to sometimes aggressive annuity sales tactics.

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