A 65-year-old California consumer purchases a VARIABLE annuity. When she returns the contract within the senior free-look period, what is the insurer required to refund?

Explanation

Under California Insurance Code §10127.10, the 30-day senior free-look applies to individual life AND annuity contracts (including variable annuities) issued to persons age 60 or older. Variable annuities raise a unique issue: subaccount investment performance could create a refund-value mismatch. California regulations and most carrier filings respond by either refunding the contract VALUE (which may be more or less than premium) or requiring that premium during the free-look be allocated to a stable money-market subaccount so that the consumer receives a full premium refund — which is why the response describing a refund of either the contract value or the premium paid, with premium-protection allocation for senior buyers, is correct. The response promising all premium back in every case with no adjustment for subaccount performance overstates the simple premium-refund rule for variable products. The response capping the senior's refund at 50% of premium fabricates a 50% rule. The response exempting variable annuities from the free-look because federal securities law governs is wrong; variable annuities are NOT exempt — they are covered by both California free-look rules and federal SEC/FINRA rescission rights.