When replacing an existing annuity with a new one, which disclosures must be provided?

When replacing an existing annuity with a new one, which disclosures must be provided?

• A. Surrender charges, changes in benefits, and potential tax consequences
• B. Marketing materials only
• C. Investment performance history only
• D. None of the above

Answer: (A)

When you replace an existing annuity, there are specific disclosures you must provide so the client understands the financial impact of the move. The required items are: surrender charges on the old contract (what penalties apply if the old contract is surrendered early and how long they last), changes in benefits with the new contract (how guarantees, riders, death benefits, and fees compare to the old contract), and potential tax consequences (how surrendering the old contract and purchasing the new one could affect taxes). These disclosures help the client weigh costs, benefits, and tax effects before deciding to replace. Marketing materials alone don’t cover the contract-specific penalties or benefit comparisons, and investment performance history isn’t the necessary disclosure for replacement decisions. None of the above isn’t correct because these replacement-specific disclosures must be provided.

When you replace an existing annuity, there are specific disclosures you must provide so the client understands the financial impact of the move. The required items are: surrender charges on the old contract (what penalties apply if the old contract is surrendered early and how long they last), changes in benefits with the new contract (how guarantees, riders, death benefits, and fees compare to the old contract), and potential tax consequences (how surrendering the old contract and purchasing the new one could affect taxes). These disclosures help the client weigh costs, benefits, and tax effects before deciding to replace.

Marketing materials alone don’t cover the contract-specific penalties or benefit comparisons, and investment performance history isn’t the necessary disclosure for replacement decisions. None of the above isn’t correct because these replacement-specific disclosures must be provided.