State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under California's annuity suitability law, which transaction qualifies as a replacement of an existing annuity?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 10509.913(h) defines replacement broadly: a new policy or contract is bought and, because of the transaction, an existing contract is lapsed, forfeited, surrendered or partially surrendered, assigned, reduced in value through nonforfeiture benefits, reduced in benefits or term, reissued with reduced cash value, or used in a financed purchase. A financed purchase — surrendering value to fund a new contract — is expressly a replacement.
Why the other options are wrong
- B) Adding a rider to the same contract does not terminate or reduce an existing contract; it is an enhancement of the current policy.
- C) An additional premium deposit increases the existing contract's value and does not replace it.
- D) A beneficiary change is an ownership-right transaction with no impact on the contract's value or continuation.
Memory hook
Replacement = old contract loses value, term, or cash while a new one is bought. Surf the §10509.913(h) list.