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Paul has an existing annuity and is sold a new one, in which the newpolicy holds no greater financial benefit to him than the existing contract.This is considered a(n)
Paul has an existing annuity and is sold a new one, in which the newpolicy holds no greater financial benefit to him than the existing contract.This is considered a(n)a. illegal transaction
b. immediate annuity
c. deferred annuity
d. unnecessary replacement
Final answer:The replacement of an existing annuity with a new one that holds no greater financial benefit is known as an unnecessary replacement. Annuities should only be replaced if they offer tangible advantages for the owner. Selling a new annuity without added benefits is often considered an unethical business practice.Explanation:When Paul is sold a new annuity that does not offer greater financial benefits than his existing contract, this practice is considered a unnecessary replacement. Financial advisors and insurance agents have a duty to ensure that any new financial products they sell, such as annuities, are suitable and beneficial for their clients. If the new annuity does not present an advantage or provide additional value, replacing the old annuity can potentially disrupt the financial stability Paul currently has. Transactions that only serve to profit the seller, while offering no additional benefit to the buyer, can be considered unethical.An annuity itself is a financial product designed to provide periodic payments to an individual, typically utilized for retirement income. It involves an agreement with a financial institution that promises to pay a certain amount of money either immediately or deferred, depending on the type of annuity chosen. However, when considering the replacement of an existing annuity, it is essential to assess whether the new annuity holds any financial benefit to justify the switch, accounting for any associated costs or changes in contract terms.This situation described implies that the new annuity Paul bought has no added features, benefits, or improved terms that would make it a preferable choice over his existing annuity. Therefore, the new policy's purchase may not serve his financial interests and might instead be driven by other reasons, such as commissions for the seller....