Texas Life & Health: Annuities

Correct

The answer is A: The product is likely unsuitable for her age and liquidity needs.

Under Texas's annuity best-interest standard (Insurance Code Chapter 1115), an agent must have a reasonable basis to believe a recommendation addresses the client's financial situation, insurance needs and financial objectives, including her liquidity needs (§1115.0513). A 78-year-old client with limited liquid assets and a need for immediate access to funds for emergencies would likely find a long-term deferred annuity with significant surrender charges unsuitable, as it ties up capital for an extended period and penalizes early withdrawals. The agent's recommendation does not meet the client's liquidity needs or age considerations. Age alone does not make one ineligible, and offering a variable annuity might be even less suitable if the client is risk-averse.

Source: Insurance Code §1115.0513

Correct

The answer is D: Document the consumer's information and the basis for the recommendation.

Chapter 1115's documentation obligation requires the agent, at the time of the recommendation or sale, to make a written record of the recommendation and its basis (§1115.0516). Agents and insurers must keep the consumer information collected and other information used in the recommendation for five years and make it available to the commissioner (§1115.055). Documentation is NOT filed with TDI on every sale. Good-faith belief without documented analysis does not satisfy the rule because it cannot be verified by regulators.

Source: Insurance Code §1115.0516 · Insurance Code §1115.055

Correct

The answer is B: The insurer issuing the annuity.

Under Insurance Code §1115.052, each insurer must establish and maintain a supervision system reasonably designed to achieve its own and its agents' compliance with Chapter 1115, while the agent is responsible for the specific recommendation made to the consumer. The consumer has no compliance burden — the rule exists to protect them. TDI enforces the rule but does not supervise individual transactions in real time.

Source: Insurance Code §1115.052

Correct

The answer is A: Proceed only after she signs a statement refusing to give the information.

Chapter 1115 contemplates that a consumer may refuse to provide consumer profile information. In that case the agent must obtain a statement signed by the consumer documenting the refusal and its ramifications, on a form like the NAIC Consumer Refusal to Provide Information form (§1115.0516). The refusal limits the analysis, but it does not remove the agent's disclosure and documentation duties, and the insurer's issuance of the annuity must still be reasonable (§1115.0507). The agent does not refuse to disclose product information and does not report to TDI. A blanket 'waiver' of the rules is not permitted.

Source: Insurance Code §1115.0516 · Insurance Code §1115.0507

Correct

The answer is C: Fixed indexed annuity.

FIAs are designed precisely for this profile: principal protection (no negative crediting in a down market) plus index-linked upside (subject to caps, participation rates, and spreads). Variable annuities expose the client to direct market losses absent expensive optional riders. Traditional fixed annuities offer no market participation. SPIAs convert a lump sum to income — not an accumulation vehicle. FIAs sit between fixed and variable in risk/return.

Reviewed in our October 2026 Texas fact-check.