Under New York's standard nonforfeiture law for annuities (N.Y. Ins. Law §4223), when the holder of a deferred annuity stops paying considerations, the contract must provide...
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under N.Y. Ins. Law §4223 — the standard nonforfeiture law for annuities, working with the related nonforfeiture provisions of Art. 42 such as §4220 — a deferred annuity must provide that upon cessation of payment of considerations the company will grant a paid-up annuity benefit on a plan stipulated in the contract; where the contract provides cash surrender benefits, those must meet the statutory minimums on surrender. Variable annuities and immediate annuities are excluded from §4223, but for an ordinary deferred annuity the paid-up annuity benefit is the core nonforfeiture protection.
Why the other options are wrong
- B) Nonforfeiture does not entitle the holder to a refund of all considerations paid; value is preserved through a paid-up annuity benefit or statutory cash surrender benefit.
- C) The whole point of the nonforfeiture law is to prevent total forfeiture when payments stop after the contract has acquired value.
- D) Annuity nonforfeiture benefits remain annuity benefits — there is no conversion into a paid-up life insurance policy.
Memory hook
Stop paying a deferred annuity? It becomes a paid-up annuity, not a zero.