A California producer recommends that a 68-year-old client surrender his existing deferred annuity and purchase a new annuity with a different carrier. Under California Insurance Code §10509.4 and the CDI replacement regulations, the producer must:
Explanation
Under California Insurance Code §10509.4 and the CDI's replacement regulations (10 CCR §2698.30 et seq.), a 'replacement' transaction — defined broadly to include any new policy whose purchase involves discontinuing, surrendering, lapsing, forfeiting, or otherwise reducing benefits on an existing life or annuity contract — triggers strict notice and comparison requirements. The producer must (1) present and obtain a signed 'Notice Regarding Replacement,' (2) list each contract being replaced, (3) submit the notice to BOTH the existing and the replacing insurer, and (4) provide written comparison information. Option B is wrong; oral, post-application recommendations violate the rules. Option C invents producer discretion. Option D is wrong; INTERNAL replacements at the same insurer are still subject to replacement rules (with limited exceptions). Senior replacement scrutiny is especially high.
Law Reference: California Insurance Code §10509.4 (replacement of life and annuity contracts)Practice all 315 questions free — no signup required.
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