PSI Life Exam Practice Test

Which of the following is NOT subject to the Wisconsin annuity suitability law?

1. Variable annuities

2. Fixed settlement options

3. Fixed annuities

4. Indexed annuities

The correct answer is: Fixed settlement options

The Wisconsin annuity suitability law is designed to ensure that insurance producers recommend annuity products that are suitable for their clients based on various factors, such as the client's financial situation, investment objectives, and risk tolerance. In this context, certain products may not fall under the same regulatory scrutiny as others. Fixed settlement options, which typically involve making a one-time lump-sum payment to an insurance company in exchange for a series of regular payments, do not carry the same complexities or risks associated with products like variable or indexed annuities. These fixed settlement options are considered more straightforward compared to other types of annuities and are often used to fulfill a specific obligation, like a structured settlement resulting from a legal case. Because the nature of fixed settlement options does not include the investment risks and various configurations characteristic of other annuity types, they are generally exempt from the stringent requirements of the annuity suitability law. This distinction is key in understanding why fixed settlement options do not require the same levels of assessment or documentation as variable, indexed, or fixed annuities, which are subject to suitability reviews to better protect consumers.