What is the term for a transaction where a new annuity is purchased and an existing annuity is lapsed or surrendered?

The term for a transaction where a new annuity is purchased and an existing annuity is lapsed or surrendered is known as "replacement." This concept highlights the process by which an old financial product is replaced by a new one, which can involve various considerations, including suitability for the consumer's financial goals and a thorough understanding of any charges or benefits associated with the existing annuity.

In the context of financial transactions, it's important to address the implications of replacing an annuity. This includes assessing the potential loss of benefits from the existing annuity, such as guarantees, death benefits, or accumulated interest that might be forfeited upon surrender. Additionally, the suitability of the new product must be evaluated to ensure that it meets the consumer's current needs better than the lapsed product.

Understanding the concept of replacement is crucial for agents and advisors, as they are often required to follow regulatory guidelines that mandate disclosure of information and ensure that clients are provided with a clear understanding of the implications of replacing an annuity. This is to protect consumers from making decisions that could adversely impact their financial situation.