Topic 3

What is the maximum allowed amount of investments in a separate account in any one issuer? 3% 10% 15% 25%

10% Separate accounts cannot invest more than 10% of account assets in any one issuer.

Which of the following must submit an approved variable life prelicensing course to the Commissioner? Instructor Third party provider Insurer Producer

Insurer Every insurer must submit a detailed training course outline specific to variable life insurance along with its application for authority to sell variable products. The course must provide at least 8 hours of classroom instruction

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? $0 $200 $9,800 $10,000

$9,800 In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.

All of the following are correct regarding contracts between an insurer and an investment consultant for variable products EXCEPT -The Commissioner may request additional information regarding the supplier's qualifications. -The Commissioner does not have the authority to review a contract person who is not an employee of the insurer. -The consultant must be under a bond for the amount proportionate to the separate account value. -All contracts must be in writing.

-The Commissioner does not have the authority to review a contract person who is not an employee of the insurer. The Commissioner has the authority to review and approve all contracts; review and approve the persons who have custody of the funds; and may request any information needed to assure that suppliers are complying with all regulations.

For which of the following would the Commissioner deny an insurer's authorization to sell variable products? No full-time actuaries An insurer's home state Commissioner audits only every 5 years An insolvent partner in another state Fewer than 50 licensed producers

An insolvent partner in another state An insurer's partner must meet this state's standards for sound financial condition; an insolvent partner could affect another insurer's financial stability.

An insurer submitted a separate account annual report to the Commissioner, who found that the report could mislead policyowners. What is the most likely result? The separate account will be frozen. The insurer will distribute a corrected annual report. The Commissioner will fine the insurer. A correction note will be included in the next annual report.

The insurer will distribute a corrected annual report. Although fines are possible for gross violations, the Commissioner will require a distribution of corrected material when misleading or materially inaccurate reports are made.

An insurer wants to provide a streamlined variable life insurance product that maximizes policyowners' cash accumulation growth. All of the following features must be included in the policy EXCEPT Initial face amount is guaranteed. The policy reflects investment experience of separate accounts. The policyowner bears mortality expense risk. Incidental insurance benefits are stated separately.

The policyowner bears mortality expense risk. In a variable life insurance policy, the insurance company, not the policyowner, must bear the mortality and expense risks.

A prospectus distributed with a variable life policy must include all of the following EXCEPT The federal taxes that apply to the policyowner. The investment objectives of the separate account. The separate account investment portfolio. The charges that will be deducted from the separate account.

The separate account investment portfolio. The separate account portfolio is not required in the prospectus.

What is the minimum required amount of reserves in flexible premium variable policies? -The aggregate amount of the attained age level reserves on each variable life policy -The amount of assets held in the company's general account -The amount of costs estimated by the insurer for one full year -The aggregate total of the term costs for the guarantee period

-The aggregate total of the term costs for the guarantee period Flexible premium policies require minimum reserve amounts that are not less than the aggregate total of the term costs for policy guarantee period.

When low interest rates impact a variable life insurance policy, which of the following is true in regards to the policy's reserves? -Separate account benefits have a minimum value. -The insurer guarantees separate account reserves. -The insurer guarantees general account reserves. -Reserves are based on the insurer's estimates.

-The insurer guarantees general account reserves. General accounts and the reserves within them are guaranteed by the insurer. Separate accounts have no guarantees and no minimums. Reserves are based upon the Commissioner's valuation rate and mortality tables.

Investment returns in a variable life insurance policy are very good this year, and the policyowner has made all required premium payments. According to the insurer's benefit base formula, the investment gains can be allocated to all of the following EXCEPT Variable insurance additions. Cash surrender value. General account. Paid-up additions.

General account. Once the benefit base costs are paid, the insurer does not participate in the separate account gains. Because the insurer owns the general account, portfolio gains cannot be allocated to that account.

A policyowner has owned a variable life policy for more than 5 years. She needs money right away to purchase a property at an auction. Which of the following reasons could delay a loan from the separate account? State of emergency Insurer's insolvency Deferral for up to 6 months President's Day

State of emergency If the payment is based on the policy values from the separate account's performance, the payment can be deferred for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make the payment impractical.

A producer takes an application for a variable life insurance policy and leaves a premium receipt. What else must the producer leave with the applicant? An annual report and policy illustration Separate account investment portfolio list Prospectus A hypothetical illustration

Prospectus Before taking an application for variable life, the insurer must provide the applicant a prospectus, and obtain a written delivery receipt for the prospectus.

In the annual report delivered to the policyowner, the insurer stated that the policy has a projected value less than zero. Which of the following is true? -The policyowner must instruct the insurer to reinvest the funds in the separate account to ensure better performance. -The policy will be terminated effective the policy anniversary date. -The insurer must advise the policyowner to pay additional premium. -The insurer will allocate funds from its general account to keep the policy in force.

-The insurer must advise the policyowner to pay additional premium. If the projected value is less than zero, a warning message must be included that states that the policy may be in danger of terminating without value in the next 12 months unless additional premium is paid.

When may an insurance company use suicide as a defense against paying a death claim? -At any time suicide can be proven -At no time -When death occurs within a specified period of time after the policy was issued -Only when there was a witness to the event

-When death occurs within a specified period of time after the policy was issued An insurance company can deny a claim if the death of the insured was by suicide and occurred within a time specified in the policy.

If a person is handling separate accounts for a variable insurer, the person cannot have any felony or misdemeanor convictions involving fraud, embezzlement, or securities law violations within at least how many years? 3 years 5 years 10 years 12 years

10 years Separate account employees must not have been permanently barred from the securities business or convicted in the last 10 years of any felony or misdemeanor involving embezzlement, fraud, deceit, knowing misrepresentation, or securities law violation.

If an insurer wants to change investment advisors for a variable life insurance separate account, how much notice must it give the current advisors? 10 days 30 days 45 days 60 days

60 days Investment advisory service contracts must be in writing and may be cancelled by the insurer without penalty to the insurer or the separate account with 60 days' written notice.

How often must insurers file a statement of the business of their separate accounts? Monthly Quarterly Annually Once every 3 years

Annually Insurers must file an annual statement of the business of their separate account(s) as prescribed by the NAIC, and any additional information regarding their operations as the Commissioner deems necessary.

What required provision protects against unintentional lapse of the policy? Assignment Payment of premiums Reinstatement Grace period

Grace period The grace period is the period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days). The purpose of the grace period provision is to protect the policyholder against an unintentional lapse of the policy.

An insurer that seeks authorization to sell variable products must provide the Commissioner with all of the following EXCEPT Producers' biographical data. The custodian's name. Procedures for changing the investment policy. Mortality and expense risks.

Producers' biographical data. Producers must be properly licensed to sell variable products; however, only biographical data for officers and directors is required for authorization.

How often are insurers required to determine the cash values of each variable life policy? Monthly Quarterly Semi-annually Annually

Monthly According to the state regulations for variable products, insurers must determine the cash values of each variable life policy at least monthly.

To sell variable life insurance in this state, an agent must meet all of the following requirements EXCEPT Hold an active life insurance license. Post a bond proportional to the separate account. Provide proof of completing prelicensing education. Become a registered representative with FINRA.

Post a bond proportional to the separate account. All candidates for a variable products license must have an active life insurance license, a securities license that authorizes variable life insurance, and submit evidence from the sponsoring company that the agent has completed the required prelicensing course and has passed the state variable life agent examination.

Which of the following bears the investment risk of separate accounts in variable products? The issuer of securities The policyowners The Guaranty Association The insurer

The policyowners The insurer owns the separate account, but the investment gains and losses belong to the policyowners.