Series 6 – Investment Company and Variable Contract Products Representation Qualification Exam Variable Annuities & Variable Life Products Flashcards

Which of the following statements about variable life insurance is 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.

A variable universal life (VUL) insurance policy differs from variable life insurance primarily in that VUL:

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.

Which regulatory body requires a registered representative to hold a securities license before selling variable annuities or variable life products?

Answer: FINRA

Because variable products are securities, FINRA (and the relevant state securities regulators) require a securities registration such as the Series 6 license.

What is the tax treatment of withdrawals from a non-qualified variable annuity before age 59½?

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.

In a variable annuity, subaccounts are MOST similar to:

Answer: Mutual funds

Subaccounts function like mutual funds — they pool investor money and are managed according to specific investment objectives.

Which annuity settlement option guarantees payments for a specified period regardless of whether the annuitant is alive?

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.