South Carolina Life Insurance Practice Exam

What condition allows for the waiver of a surrender charge on an annuity contract?

1. If the annuitant changes their mind

2. If the annuitant is confined to a long-term care facility for at least 30 days

3. If the annuitant is under 65 years old

4. If the annuitant receives a lower interest rate

The correct answer is: If the annuitant is confined to a long-term care facility for at least 30 days

The waiver of a surrender charge on an annuity contract is typically allowed when the annuitant is confined to a long-term care facility for a specified period, often 30 days. This provision is put in place to provide financial relief to individuals who may face unexpected medical expenses and the potential need to access their funds without incurring penalties. When an annuitant is placed in a long-term care facility, their ability to manage their investments may be compromised. Therefore, insurance companies recognize this circumstance as one where the surrender charges can be waived, allowing the annuitant to access their cash value without the financial burden of additional fees. Such clauses are designed to offer protection and flexibility for policyholders during challenging life events. In contrast, other conditions listed do not typically provide grounds for waiving surrender charges under standard annuity contract terms. For instance, merely changing one’s mind does not justify the waiver, as contracts usually stipulate specific conditions under which such waivers apply. Being under 65 years old does not inherently relate to financial need or health status relevant to accessing funds. Receiving a lower interest rate, while potentially frustrating for the annuitant, does not impact the waiver of surrender charges either, as those charges are part of the