by John Darer CLU ChFC MSSC CeFT RSP CLTC
If a settlement planner or financial adviser, annuity wholesaler, or factoring company representative is trying to get you to invest in something they call a
"secondary market annuity", they are misleading you because what they are pushing is not an annuity. You may want to read this before going any further with them. To explain, here is a sampling of authorities on what an annuity actually is.
An annuity is a contract between you and an insurance company in which the company promises to make periodic payments to you, starting immediately or at some future time. You buy an annuity either with a single payment or a series of payments called premiums.
Annuities are often products investors consider when they plan for retirement—so it pays to understand them.
An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments. Similarly, your payout may come either as one lump-sum payment or as a series of payments over time.
Sec. 38a-430. (Formerly Sec. 38-135a). Approval of form of life insurance and annuity policies and contracts. War or military service coverage exclusion prohibited. Optional health insurance riders. (a) No life insurance or annuity policy or contract shall be delivered or issued for delivery to any person in this state, nor shall any application, rider or endorsement be used in connection therewith, until a copy of the form thereof shall have been filed with and approved by the commissioner. The commissioner shall adopt regulations, in accordance with the provisions of chapter 54, establishing a procedure for review of such policies and contracts. The commissioner shall issue an order disapproving the use of any such form at any time if it does not comply with the requirements of law, or if it contains a provision or provisions that are unfair or deceptive or that encourage misrepresentation of the policy. The commissioner shall specify the reason for the commissioner's disapproval. The provisions of section 38a-19 shall apply to any such order issued by the commissioner.
New York Law
Insurance Law § 3201 requires all life insurance and annuity policy or contract forms that are delivered or issued for delivery in this state or are deemed to have been delivered in this state, to be filed with and approved by the Superintendent as conforming to the requirements of the Insurance Law and not inconsistent with the law.
Insurance Law § 1102 prohibits any person, firm, association, corporation or joint-stock company from doing an insurance business in this state unless authorized by a license or exempted from licensing.
New Jersey Law
The Life and Health Insurance and Health Maintenance Organization Form Approval Reform Act ("the Act") (P.L. 1995, c. 73; codified as N.J.S.A. 17B:25-18.1 et seq.), signed into law on April 10, 1995, requires all life and health insurance policies and contracts, all annuities and all variable contracts subject to Title 17B of the New Jersey Statutes, to be filed with and approved by the Commissioner of the Department of Banking and Insurance ("Commissioner").
Annuity” means an insurance product under state law which is individually solicited, whether classified as an individual or group annuity.
National Association of Insurance Commissioners (NAIC)
Buyer's Guide " An annuity is a contract with an insurance company"
Statutory Issue Paper No. 160, finalized April 6, 2019 p 6 footnote 1
"This guidance is specific to acquired structured settlement income
streams (legal right to receive future payments from a structured settlement) and does not capture accounting and reporting guidance for the acquisition of any insurance product (e.g., life settlement, annuities, etc.).
New Footnote 2: Reporting entities that hold qualifying structured settlement payment rights shall report the security on Schedule BA either as an “any other class of asset” or as a “fixed or variable interest rate investment with underlying characteristics of other fixed income instruments” if the structured settlement payment right qualifies for reporting within that reporting line (e.g., NAIC designation).
You can invest in someone else's structured settlement payments or receivables, but just understand it is not an annuity because while you should be able to, you can't necessarily count on the advisers to tell you, assuming they even know the difference.