Chapter 4: Variable Products

Question 1

________ _______ provides a way for policyowners to earn higher investment returns on life insurance policy cash values.

Answer 1

Variable Insurance

Question 2

With variable life insurance, the interest rate is ______ because it is linked to the ______ _______ account.

Answer 2

Variable
Insurer’s Separate

Question 3

TF: For variable life, the insurer does NOT insure the separate account, so the investment risk is borne upon the policyowner.

Answer 3

True

Question 4

TF: A FINRA rep license is not required to sell variable products

Answer 4

False

Question 5

_____ _____ Life insurance provides permanent protection, with fixed level premiums and a guaranteed minimum death benefit, offering higher interest rates, defending the policyowner against the effects of inflation.

Answer 5

Variable Whole

Question 6

TF: For Variable Whole Life:Premiums are paid at regular intervals.
If the policyowner does not pay a premium after the policy grace period, the policy will lapse.
The policy cash value is not guaranteed.

Answer 6

True

Question 7

TF: Variable life policies have a guaranteed minimum death benefit, which is the policy face amount, but the policy cash value is not guaranteed since it is tied to the separate account. Therefore, the death benefit will increase or decrease over time according to the investment performance.

Answer 7

True

Question 8

For variable life policies, the cash value is figured _______.

Answer 8

Daily

Question 9

TF: For variable life, policy loans are typically limited to 90% of the policy’s cash value.

Answer 9

False - 75-80%

Question 10

TF: a securities license is required to sell variable products

Answer 10

True

Question 11

Who chooses the investment for a variable life policy?

Answer 11

The policyowner

Question 12

What three pieces of legislation regulate variable life insurance?

Answer 12

Securities Act of 1933 (prospectus defines a security product)
Securities Act of 1934 (sales reps must have Series 6 license)
Investment Company Act of 1940 (requires separate account for variable investments)

Question 13

TF: 12% Rule = No Rate Greater Than 12% Can Be Used In Selling Policies

Answer 13

True

Question 14

Variable Universal Life (VUL) is a mixture of:

Answer 14

Whole Life
Universal Life
Variable Life

Question 15

Variable Universal Life (VUL) policies provide: ______ premiums, _____ of where cash value is invested, and a _____ death benefit

Answer 15

flexible
control
flexible

Question 16

Variable Universal Life is a universal life policy with a ______ _______.

Answer 16

Separate Account

Question 17

TF: Variable life has fixed premiums. Universal life and VUL have flexible premiums.

Answer 17

True

Question 18

Joanna has selected a variable universal life policy because it meets her needs. Which of the following is not a characteristic of a variable universal policy?
Select one:
a. It is backed by equity investments.
b. It allows the policyholder to adjust the premium.
c. It has no cash value.
d. It allows the policyholder to adjust the death benefit.

Answer 18

C

Question 19

All of the following policy elements are not guaranteed in a variable whole life policy, EXCEPT:
Select one:
a. Value in separate account
b. Accumulation units
c. Death benefit
d. Cash value

Answer 19

C

Question 20

Donna is getting ready to look at variable life insurance as an option for her insurance. Which of the following statements is TRUE about variable life insurance?
Select one:
a. The benefits of variable life insurance vary according to the premiums paid
b. The insurance company assumes the investment risk of a variable policy
c. Cash values are guaranteed
d. To sell a variable life insurance policy, the proposal must be accompanied by a prospectus

Answer 20

D

Question 21

TF: A variable life policy cannot be proposed in a sales scenario unless a prospectus precedes or accompanies the proposal, because it is considered a security.

Answer 21

True

Question 22

Which of the following laws requires sales representatives selling variable products to have a Series 6 license?
Select one:
a. Securities Act of 1933
b. Securities Act of 1934
c. Investment Company Act of 1940
d. None of the above

Answer 22

B

Question 23

Of the following policies, which has a guaranteed minimum death benefit, fixed premiums and nonguaranteed cash values?
Select one:
a. Variable life
b. Universal life
c. Variable universal life
d. Whole life

Answer 23

A

Question 24

Which life insurance policy allows the policyowner to choose where they want their funds invested?
Select one:
a. Straight life
b. Adjustable life
c. Variable life
d. Universal life

Answer 24

C

Question 25

In which fund are premiums for a variable whole life insurance policy invested?
Select one:
a. The insurer’s general account
b. The insurer’s separate account
c. The state guaranty fund
d. The insurer’s reserves

Answer 25

B

Question 26

What is the primary purpose of the Investment Company Act of 1940?
Select one:
a. Defines a securities product
b. Regulates sales representatives’ duties
c. Requires insurer to maintain a separate account for variable investments
d. Requires sales representatives to have a Series 6 license

Answer 26

C

Question 27

Insurance agent Sam would need a securities license to sell this policy:
Select one:
a. Joint life
b. Adjustable life
c. Variable life
d. Universal life

Answer 27

C

Question 28

Agents selling variable products must have which of the following?

Select one:
a. FINRA representative license.
b. Life Insurance license.
c. FINRA representative license and Life license.
d. Agents are required to be licensed to sell variable products.

Answer 28

C