Group Life & AnnuitiesQuestion 117 of 716
Which statement about a typical annuity surrender charge schedule is correct?
a.It usually declines year by year and eventually reaches 0%
b.It applies only to withdrawals taken after the owner reaches 59½
c.It is set by IRS regulation rather than by the annuity contract
d.It is a flat percentage that applies for the life of the contract
Explanation
Annuity surrender charges typically follow a declining schedule such as 7%, 6%, 5%, 4%, 3%, 2%, 1%, 0%, ending at zero after the surrender period. The schedule is a contract provision, not an IRS rule.
Law Reference: Cal. Ins. Code §10127.13This topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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Related questions on this topic
- A married couple wants lifetime income that continues to whichever spouse lives longer. Which annuity settlement option is the most common fit?
- What is the additional IRS penalty (on top of ordinary income tax) for taking a taxable withdrawal from a non-qualified annuity before age 59½?
- Which of the following exchanges is NOT permitted on a tax-free basis under Internal Revenue Code Section 1035?
- During the accumulation phase of a non-qualified deferred annuity, how is the interest credited inside the contract treated for federal income tax purposes?
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)