October 5, 2023
Annuity Rate Lock 101
When rates change, what rate will your client get?
Sometimes, interest rates, participation rates, and/or caps change after your client’s application is received by National Life but before the premium is received and the policy issued. In that case, which rate applies?
It depends on whether the rates are going up or down.
Scenario 1: Policy Rates Increase Before Receipt of Funds
The application was received by National Life, but before the premium is received, an interest rate increase goes into effect.
Good news! Your client will receive the increased rates.
Scenario 2: Policy Rates Decrease Before Receipt of Funds
The application was received by National Life, but before the premium is received, rates decrease.
Your client will not automatically get the lower rates. Instead, in many situations, your clients will receive locked-in rates, as determined by our rate lock guidelines.
The rate lock period starts the moment the application was received and ends after a specific period, depending on the type of annuity.
- Fixed indexed annuities (FIAs): The rate lock period extends 60 calendar days from the application receipt date.
- Fixed annuities (FAs) and multi-year guaranteed annuities (MYGAs): The rate lock period currently extends 90 calendar days from the application receipt date.
For example, if an FIA application was received by National Life 10 days before a decrease in policy rates, the money must be received within 50 days after the rate change for your client to receive the locked rate. If the application was received 50 days before the decrease, the money must be received within 10 days after the rate change for your client to receive the locked rate. In both cases, the rate lock period is a total of 60 days.
Important things to remember:
- To secure a locked-in rate, applications must be received at the National Life home office before the rate change date. Submission to an agency, broker-dealer, or any other entity for preprocessing does not lock the rate.
- An application can only be rate locked once. If there are more decreases during the rate lock period, it will not restart.
- If National Life receives the money after the end of the rate lock period, the policy will receive the rates that are in effect on the date the premium was received.
- SPDA policies with a 90-day premium window: Only premiums received before the end of the applicable rate lock period will receive the locked rate.
- Flexible Premium Deferred Annuities (FPDAs): All premium payments will receive the policy rate in effect on the date National Life receives the money. This includes FIAs and FAs that allow for ongoing premium payments.
