Pennsylvania annuities practice questions
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Section 6.0 Annuities is 12% of the Pennsylvania Life exam (Series 16-01). [1] The outline covers annuity principles (accumulation versus annuity period; owner, annuitant and beneficiary; the right to examine; immediate versus deferred), payout options, annuity products (fixed, equity indexed, immediate and variable), the Pennsylvania rules for variable annuities and separate accounts, suitability of annuities, and uses of annuities. [1] This page sets out the Pennsylvania law in that section and gives 10 practice questions.
Key Pennsylvania rules
Right to examine (Insurance Company Law, section 410E). An individual fixed dollar annuity must give the contract holder at least ten days after delivery to return it for a refund if not satisfied for any reason. When the annuity replaces an existing annuity or life policy with the same insurer or insurer group, the period is at least forty-five days. When it replaces a contract from a different insurer or insurer group, it is at least twenty days. An individual variable annuity must allow return within at least ten days of delivery. [2]
Best interest when recommending (section 403-B). A producer recommending an annuity must act in the consumer's best interest under the circumstances known at the time, without putting the producer's or the insurer's financial interest ahead of the consumer's. The duty is met by satisfying obligations for care, disclosure, conflict of interest and documentation. [2]
The care obligation means using reasonable diligence, care and skill to:
- know the consumer's financial situation, insurance needs and financial objectives;
- understand the available recommendation options after a reasonable inquiry;
- have a reasonable basis to believe the recommended option effectively addresses the consumer's situation over the life of the product; and
- communicate the basis or bases of the recommendation. [2]
Section 403-B also says these duties do not create a fiduciary obligation, do not require recommending the annuity with the lowest compensation, and do not create an ongoing monitoring duty. For an exchange or replacement, the producer must consider the whole transaction, including surrender charges, a new surrender period, lost benefits, higher fees, and whether the consumer had another exchange or replacement within the preceding 60 months. [2]
Where the rules apply (section 402-B). The article applies to any sale or recommendation of an annuity. It does not apply to direct response solicitations with no recommendation, to contracts used to fund employer plans such as ERISA plans, to settlements or assumptions of liabilities from personal injury litigation or a claim resolution process, or to formal prepaid funeral contracts. [2]
Annuity training (section 403.1-B). A producer with authority to sell annuities must complete at least four continuing education credits of annuity training. [2]
Variable annuities and separate accounts (31 Pa. Code Chapter 85). Income, gains and losses on each separate account are credited to or charged against that account without regard to the company's other income, gains or losses. [3] The Department examines the investments and operation of separate accounts periodically. [4] Companies must mail individual variable annuity holders a statement at least once each contract year after the first, reporting the investments held in the separate account. [5]
Practice questions
1. How long is the minimum free look on a new individual fixed dollar annuity that is not a replacement?
A. 10 days
B. 15 days
C. 20 days
D. 45 days
Answer: A. The contract holder may return it within at least ten days of delivery. (Insurance Company Law, section 410E(a)(1)) [2]
2. A client replaces an annuity with a new fixed annuity from the same insurer group. What is the free look?
Answer: At least forty-five days. (section 410E(a)(2)) [2]
3. The replacement fixed annuity comes from a different insurer. What is the free look?
Answer: At least twenty days. (section 410E(a)(3)) [2]
4. Under Pennsylvania's best interest rule, whose financial interest may the producer put first?
Answer: Neither the producer's nor the insurer's interest may be placed ahead of the consumer's. (section 403-B(a)) [2]
5. Which of these is one of the four care obligations?
A. Recommend the product with the lowest commission
B. Monitor the annuity every year after the sale
C. Know the consumer's financial situation, insurance needs and financial objectives
D. Hold a securities license
Answer: C. The law says the lowest compensation product need not be recommended and that the care duty carries no ongoing monitoring obligation. (section 403-B(a)(1)) [2]
6. Does the Pennsylvania best interest rule make the producer a fiduciary?
Answer: No. It creates a regulatory obligation only, not a fiduciary obligation or relationship. (section 403-B(a)(1)(iv)) [2]
7. When reviewing a replacement, what look-back period for earlier exchanges must the producer consider?
Answer: Whether the consumer had another annuity exchange or replacement within the preceding 60 months. (section 403-B(a)(1)(x)) [2]
8. How much annuity training must a producer complete to sell annuities?
Answer: At least four continuing education credits of annuity training. (section 403.1-B(a)) [2]
9. A separate account backing a variable annuity has a strong year while the company's other business loses money. How are the separate account's gains handled?
Answer: They are credited to that separate account without regard to the company's other income, gains or losses. (31 Pa. Code 85.23) [3]
10. How often must a company mail a statement to an individual variable annuity holder?
Answer: At least once in each contract year after the first year. (31 Pa. Code 85.27(a)) [5]
Study tips for section 6.0
- Memorize the free look trio for fixed annuities: 10 days new, 45 days same insurer replacement, 20 days different insurer replacement.
- Learn the four best interest obligations by name: care, disclosure, conflict of interest and documentation.
- For variable annuity questions, think "separate account": its results stay with that account.
- The outline also lists payout options (life, period certain, life with guaranteed minimum, single versus joint) and uses of annuities, so review those terms as well. [1]
Practice the whole Life exam with our Pennsylvania life practice test.
Prep Retention is independent and is not affiliated with PSI or the state.
Sources
Laws and exam documents quoted as of October 2026.
- PSI, Pennsylvania Life outline, Series 16-01 (effective 3/1/2026): https://proctor2.psionline.com/media/programs/PAINS/16-01xx.pdf
- Insurance Company Law of 1921 (Act of May 17, 1921, P.L. 682, No. 284), Sections 402-B, 403-B, 403.1-B and 410E: https://www.palegis.us/statutes/unconsolidated/law-information/view-statute?iFrame=true&txtType=HTM&SessYr=1921&SessInd=0&ActNum=0284
- 31 Pa. Code 85.23: https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/031/chapter85/s85.23.html&d=reduce
- 31 Pa. Code 85.21: https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/031/chapter85/s85.21.html&d=reduce
- 31 Pa. Code 85.27: https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/031/chapter85/s85.27.html&d=reduce