Definition of "Unnecessary Replacement"

Unnecessary replacement means selling an annuity to replace an existing annuity if the insured has to pay a surrender charge without also getting a substantial financial benefit over the policy's life.

When policyholders repeatedly buy replacement policies from the same agent after indicating on applications that replacement is not involved, the agent is presumed to know these replacements are intentional violations.

Examples of Unnecessary Replacements

• The existing annuity has a lower interest rate.

• The existing annuity features a guaranteed interest rate while the replacement annuity does not.

• The existing annuity has better settlement options than the replacement annuity.

• The existing annuity has a guaranteed rate; the replacement is a Variable Annuity or indexed-annuity.

• In all of the above, it is assumed that all other provisions are equal.

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