Group Life & AnnuitiesQuestion 696 of 716
A surrender charge on a deferred annuity:
a.Is a federal tax that is imposed on the annuity's earnings each and every year that the contract remains in the accumulation phase
b.Is a declining penalty for withdrawing funds during the early contract years, letting the insurer recover its costs
c.Applies only at the annuitant's death
d.Rewards the owner for withdrawing early
Explanation
A surrender charge is an insurer-imposed penalty that typically declines each year during the surrender period, protecting the insurer from early liquidation costs. It is not a reward or a federal tax.
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Related questions on this topic
- Group short-term disability (STD) differs from long-term disability (LTD) mainly in that STD:
- The exclusion ratio for an annuity payout is calculated as the:
- Once an annuitant has lived long enough to recover the entire cost basis through the exclusion ratio, subsequent payments are:
- Many deferred annuities include a free withdrawal provision allowing the owner to withdraw, without a surrender charge, up to:
- A withdrawal of taxable gain from a nonqualified annuity before age 59 1/2 is generally subject to:
- When determining the suitability of an annuity recommendation, a producer should consider the client's:
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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)