Series 6 – Investment Company and Variable Contract Products Representation Qualification Exam Series 6 – Investment Company and Variable Contract Products Representation Qualification Exam Variable Annuities & Variable Life Products 2 — Questions and Answers
Question 1: Which of the following statements about variable life insurance is CORRECT?
- The death benefit is always fixed and never changes
- Cash value and potentially the death benefit fluctuate based on subaccount performance (Correct answer)
- Premium payments vary at the policyholder's discretion
- It does not require a securities license to sell
Correct answer: Cash value and potentially the death benefit fluctuate based on subaccount performance
Variable life insurance has a fixed minimum death benefit, but the actual death benefit and cash value vary with the performance of the chosen subaccounts.
Question 2: A variable universal life (VUL) insurance policy differs from variable life insurance primarily in that VUL:
- Offers investment subaccounts while variable life does not
- Provides flexible premium payments while variable life has fixed premiums (Correct answer)
- Guarantees a minimum cash value while variable life does not
- Can only be sold by registered investment advisers
Correct answer: Provides flexible premium payments while variable life has fixed premiums
VUL combines the investment subaccounts of variable life with the flexible premium feature of universal life insurance.
Question 3: Which regulatory body requires a registered representative to hold a securities license before selling variable annuities or variable life products?
- The Federal Reserve
- FINRA (Correct answer)
- The IRS
- The Department of Labor only
Correct answer: FINRA
Because variable products are securities, FINRA (and the relevant state securities regulators) require a securities registration such as the Series 6 license.
Question 4: What is the tax treatment of withdrawals from a non-qualified variable annuity before age 59½?
- Tax-free up to basis, then ordinary income on gains
- Subject to ordinary income tax on the gain plus a 10% IRS early withdrawal penalty (Correct answer)
- Subject to capital gains tax only, no penalty
- Fully tax-free if held for more than five years
Correct answer: Subject to ordinary income tax on the gain plus a 10% IRS early withdrawal penalty
Pre-59½ withdrawals from non-qualified variable annuities are subject to ordinary income tax on earnings plus a 10% early distribution penalty.
Question 5: In a variable annuity, subaccounts are MOST similar to:
- Bank savings accounts
- Mutual funds (Correct answer)
- U.S. Treasury bills
- Certificates of deposit
Correct answer: Mutual funds
Subaccounts function like mutual funds — they pool investor money and are managed according to specific investment objectives.
Question 6: Which annuity settlement option guarantees payments for a specified period regardless of whether the annuitant is alive?
- Life only
- Joint and survivor
- Period certain (Correct answer)
- Cash refund
Correct answer: Period certain
A period certain option guarantees payments for a fixed number of years, and if the annuitant dies early, a beneficiary receives the remaining payments.
Series 6 – Investment Company and Variable Contract Products Representation Qualification Exam Series 6 – Investment Company and Variable Contract Products Representation Qualification Exam Variable Annuities & Variable Life Products 2
Which of the following statements about variable life insurance is CORRECT?