Utah Life Producer Practice Exam

When a deferred annuity is surrendered before entering the annuitization period, the owner is entitled to receive the surrender value of the annuity. The surrender value represents the amount that will be returned to the annuity holder after any applicable surrender charges have been deducted. This amount can be influenced by the accumulated value of the annuity minus any penalties for early withdrawal, particularly in the early years of the contract.

Surrendering before the annuitization period does not typically result in the loss of all invested funds, as would occur if funds were completely forfeited. Instead, the owner receives a portion of their investment back. Additionally, while it's true that the surrender value may be subject to taxation, this is not automatic upon surrender; tax implications will depend on the specific circumstances and the tax treatment of the annuity.

Lastly, surrendering the annuity does not result in it converting to a life policy, as the two products serve different purposes and have different structures. The life policy conversion does not happen simply through the act of surrendering an annuity. Therefore, the most accurate description of what happens upon surrendering a deferred annuity before the annuitization period is that the owner receives the surrender value of the annuity.