California regulates the surrender-charge schedule on individual deferred annuities sold to seniors. Which statement is correct about a typical compliant surrender-charge schedule?
Explanation
A typical deferred annuity has a multi-year 'declining' surrender-charge schedule (sometimes called the contingent deferred sales charge, CDSC) — for example, 8% in year 1, declining 1% per year to 0% in year 9. California requires clear pre-sale disclosure of the surrender charge schedule (Insurance Code §10127.13) and applies heightened scrutiny when the buyer is age 65 or older — surrender periods that extend beyond the senior's likely time horizon trigger suitability concerns under §10234.93. Option A is wrong — schedules must eventually drop to zero. Option C is wrong — California regulates, but does not ban, surrender charges. Option D confuses surrender charges with the free-look period.
Law Reference: Cal. Ins. Code §10127.13 (annuity surrender charges)Practice all 315 questions free — no signup required.
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