DC Variable Products in Insurance

Question 1

What licenses are required to sell variable annuities in DC?

Accepted Answer

Both a DC life insurance producer license and a FINRA Series 6 (or equivalent) securities registration

Answer

Only a DC life insurance license

Answer

Only a FINRA Series 6 or Series 7 securities registration

Answer

A DC property and casualty license and a Series 63

Question 2

In a variable annuity, the investment risk is borne by whom?

Accepted Answer

The policyholder through separate account subaccounts

Answer

The insurance company through the general account

Answer

The state guaranty association

Answer

FINRA as the securities regulator

Question 3

What is the primary purpose of the 'separate account' in a variable life insurance policy?

Accepted Answer

To hold and invest the policyholder's premium in market-based subaccounts, insulated from the insurer's general liabilities

Answer

To hold premium reserves for the insurer's general obligations

Answer

To fund the insurer's reinsurance obligations

Answer

To maintain the DC Insurance Guaranty Association's reserve fund

Question 4

Under FINRA rules applicable to DC producers, what is the 'suitability' standard for variable annuity sales?

Accepted Answer

The product must be reasonably suitable based on the customer's financial situation, needs, investment objectives, and risk tolerance

Answer

The product must be the cheapest available option

Answer

Only customers with investment experience may purchase variable annuities

Answer

Variable annuities are suitable for any customer who signs a waiver

Question 5

A DC client purchases a variable universal life (VUL) policy. Which feature distinguishes VUL from whole life insurance?

Accepted Answer

VUL allows the policyholder to allocate cash value to investment subaccounts with market-linked returns and flexible premiums

Answer

VUL provides no death benefit—it is purely an investment

Answer

VUL premiums are fixed and guaranteed never to increase

Answer

VUL policies are not regulated by DC insurance law

Question 6

What is a 'prospectus' and when must it be delivered in a DC variable annuity sale?

Accepted Answer

A legally required disclosure document describing the investment options, fees, and risks that must be delivered before or at the time of sale

Answer

A premium payment schedule delivered after the annuity is issued

Answer

A post-sale report sent annually by the insurer

Answer

An agent's personal analysis of the investment options