State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
When a producer recommends replacing an existing annuity contract with a new one, California law requires the producer to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California's replacement regulations (Section 10509 et seq.) require a producer recommending replacement to provide the consumer with replacement notices and disclosures identifying the transaction, including surrender charges, loss of benefits, and new contestability or surrender periods. The consumer signs the notice, and the insurer receives a copy. This protects consumers from harmful churning and preserves full transparency about what the replacement costs.
Why the other options are wrong
- B) The old contract is not cancelled before the new application; the new policy is typically issued with the old one lapsed or surrendered as part of the transaction, and disclosures precede that step.
- C) Concealing a replacement from the insurer would violate the disclosure regulations; copies of the replacement notice must go to the insurer.
- D) Replacement rules apply to consumers of all ages; they are not limited to senior citizens.
Memory hook
Replacement = paperwork before handshake: notice, signatures, insurer copies, honest about surrender costs.