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

A customer who owns a variable annuity wants to move assets from an aggressive growth subaccount to a bond subaccount without tax consequences. This is accomplished through a:

Answer: Subaccount transfer

Transfers among subaccounts within the same variable annuity contract are not taxable events.

A 1035 exchange allows a contract owner to:

Answer: Transfer a variable annuity to a new annuity contract without triggering a taxable event

A Section 1035 exchange permits tax-free transfers between like insurance/annuity contracts, deferring any gain to the new contract.

Which of the following best describes the accumulation phase of a variable annuity?

Answer: The period during which premium payments are invested and grow tax-deferred

The accumulation phase is the savings period in which premiums are invested in subaccounts and grow on a tax-deferred basis.

Under FINRA rules, a registered representative must deliver a prospectus to a variable annuity purchaser:

Answer: At or before the time of sale

FINRA and SEC rules require that a variable annuity prospectus be provided to the investor at or before the time of sale.

A variable annuity's guaranteed minimum death benefit typically ensures that beneficiaries receive at least:

Answer: The greater of the total premiums paid or the current account value

The standard guaranteed minimum death benefit pays the greater of total premiums paid or the contract's current account value, protecting against market losses at death.

Which of the following is NOT a cost typically associated with a variable annuity?

Answer: Front-end mutual fund sales load

Variable annuities assess M&E charges, subaccount management fees, and administrative fees, but they do not impose front-end mutual fund sales loads within the contract.