Replacing a Variable Annuity: What to Compare
Compare costs, benefits and access before an exchange.
Considering a broker-recommended replacement of a deferred variable annuity? Compare the existing contract with the proposed one before authorizing an exchange.
Build a contract comparison
Use both contracts and their prospectuses. The SEC’s variable-annuity guide identifies recurring costs including contract, administration, underlying fund and optional-benefit fees. Ask for each charge, not just a single advertised fee.
List the benefits and restrictions too. Optional benefits can cost extra, restrict investments or shrink after certain withdrawals. Guarantees depend on the insurer’s financial strength; variable investments can lose money.
Ask a tax adviser about the proposed exchange’s consequences. Do not treat a tax label as a complete cost comparison.
Ask how the broker is paid for the exchange and whether compensation differs between the contracts.
Check access, not just the bonus
FINRA’s exchange guidance warns against focusing on a bonus that higher expenses may offset. Compare the current surrender-charge expiration with the new contract’s surrender period. If you may need money soon, the renewed restriction matters even when the new features sound attractive.
Ask what you could withdraw, when, and at what charge under each contract. Some contracts offer withdrawal allowances or surrender-charge waivers, but these are not standard features. Verify the actual terms rather than assuming an allowance exists.
Compare investment options for strategy, risk and diversification. Identify which new benefit serves your goals and whether you would pay for features you do not need.
Ask why the exchange fits you
FINRA Rule 2330 requires covered exchange recommendations to consider surrender charges, a new surrender period, lost benefits, increased charges, useful enhancements and any deferred variable annuity exchange in the preceding 36 months. The recommending representative must document and sign the required determinations.
Tell the broker about previous exchanges, including those at other firms, and your liquidity needs, time horizon and financial circumstances. Ask for a written explanation connecting the proposed improvements to those needs. A recent exchange is a review factor, not an automatic ban stated by this rule.
This guide concerns individual broker recommendations, not a recommendation to buy or exchange an annuity. Checked October 24, 2026.
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