Annuity chargeback is the repayment of previously paid commissions that occurs when an annuity contract is canceled, reversed, or falls below certain thresholds within a specified chargeback period. If a client surrenders, rescinds, or significantly reduces an annuity shortly after issue, the carrier may reclaim part or all of the commission from the writing agent and, in some cases, the agency. Chargeback provisions are designed to discourage short-term or unsuitable sales and to align producer compensation with persistency. They are particularly relevant for products with high upfront commissions, such as some fixed indexed or variable annuities.

Advisors encounter annuity chargebacks when clients cancel contracts early, execute free-look rescissions, or move money elsewhere shortly after purchase. Agencies track chargeback risk and may withhold a portion of commissions or establish reserves, especially for newer producers. Advisors are encouraged to write annuities only when they are confident the product fits the clientTMs needs and that the client understands surrender periods and liquidity constraints. Excessive chargebacks can harm an advisorTMs relationship with carriers and IMOs and may trigger compliance reviews. Understanding annuity chargebacks helps advisors emphasize education and suitability up front, reduce post-sale buyerTMs remorse, and maintain healthier, more profitable books of business.