California Life & Health: Annuities

Correct

The answer is B: John, Mary, Lisa

The owner is the person who buys the annuity and has contractual rights (John). The annuitant is the person whose life expectancy the payout payments are based on (Mary). The beneficiary is the person who receives any remaining benefits if the annuitant dies before all guaranteed payments have been made (Lisa).

Reviewed in our October 2026 California fact-check.

Correct

The answer is D: The consumer's political party affiliation.

Since 1/1/2025, California Insurance Code §10509.9203(a)(3) defines the consumer profile information a producer must make reasonable efforts to obtain before recommending an annuity. It includes age, income, financial situation and needs, time horizon, liquidity needs, liquid net worth, risk tolerance, tax status, whether the consumer has a reverse mortgage, and whether the consumer intends to apply for means-tested benefits such as Medi-Cal. Political party affiliation is not on the list and has no bearing on whether an annuity fits the consumer.

Reviewed in our October 2026 California fact-check.

Correct

The answer is D: The insurer's general account, which guarantees principal and a minimum interest rate.

Fixed annuities are backed by the insurer's general account, which supports the guarantee of principal and a minimum interest rate. A separate account holds the investments behind a variable annuity, where the owner bears the market risk. A market value adjustment moves the surrender value up or down with interest rates and does not eliminate surrender charges. A participation rate is an indexed-annuity crediting feature that sets how much of an index gain is credited; it doesn't guarantee principal.

Reviewed in our October 2026 California fact-check.

Correct

The answer is B: Avoid recommending it unless it gives the client a substantial financial benefit.

Section 10509.8 makes it a violation to recommend that an insured 65 or older buy an 'unnecessary replacement' annuity: one that replaces an annuity carrying a surrender charge and does not confer a substantial financial benefit over the life of the policy, so that a reasonable person would think the purchase unnecessary. Because this client is 66 and the old annuity has a surrender charge, the exchange is an unnecessary replacement unless it confers a substantial financial benefit, and a first-year bonus that merely offsets the old charge says nothing about the life of the contract. For annuity recommendations since 1/1/2025 the best-interest article also has the producer weigh surrender charges, a new surrender period, lost benefits and any other annuity or life replacement, particularly within the preceding 60 months (Ins. Code §10509.9204(a)(1)(K)).

Reviewed in our October 2026 California fact-check.

Correct

The answer is B: The client's liquid net worth and financial objectives.

For annuity recommendations made on or after 1/1/2025, Insurance Code §10509.9203(a)(3) defines the consumer profile information that a producer must make reasonable efforts to obtain before recommending an annuity (§10509.9204(a)(1)(C)). It includes age, annual income, financial situation and needs, financial objectives, liquidity needs, liquid net worth, risk tolerance and tax status, among other items. The older §10509.913 list applies only to sales made before that date (§10509.919). Political affiliation, an employer's credit rating and religious affiliation have no bearing on the consumer's financial situation or objectives.

Reviewed in our October 2026 California fact-check.