Definition of annuity replacement.
Replacement occurs when an existing annuity is surrendered, lapsed, or terminated and replaced with a new annuity.
Why replacements are regulated.
Replacements may trigger:
Surrender charges
Loss of benefits
Restart of surrender periods
Maryland disclosure requirements.
Producers must disclose all consequences of annuity replacement to comply with good-faith and suitability rules.
Why the other options are incorrect.
Conversion: Applies to term-to-permanent policies.
Continuation: Keeping the same contract.
Reinstatement: Restoring a lapsed policy.
Conclusion.
Terminating one annuity and issuing another is a replacement.
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