#1
Which regulatory body oversees variable life insurance products in the United States?
SEC (Securities and Exchange Commission)
ExplanationSEC regulates variable life insurance products in the US.
#2
What is the surrender period in variable life insurance policies?
The period during which the policyholder can surrender the policy for its cash value without penalty
ExplanationSurrender period allows policyholders to surrender the policy for cash value without penalty.
#3
Which of the following is NOT a common investment option in variable life insurance policies?
Real Estate
ExplanationReal Estate is not a typical investment option in variable life insurance policies.
#4
Which of the following statements about variable life insurance loans is true?
Loans are allowed but may reduce the policy's death benefit if not repaid.
ExplanationVariable life insurance allows loans, which may reduce death benefits if unpaid.
#5
What does the 'variable' component in variable life insurance refer to?
The variability of the investment options
ExplanationThe 'variable' component refers to the variability of investment options.
#6
What is the purpose of the death benefit in variable life insurance policies?
To provide financial protection for the policyholder's beneficiaries
ExplanationDeath benefit in variable life insurance offers financial protection to beneficiaries.
#7
What distinguishes variable life insurance from traditional whole life insurance?
The policyholder can choose how the cash value is invested.
ExplanationVariable life insurance allows policyholders to select investment options.
#8
In variable life insurance, the cash value of the policy fluctuates based on the performance of:
The stock market investments chosen by the policyholder
ExplanationCash value in variable life insurance varies with policyholder-selected stock market investments.
#9
What is the primary tax advantage of variable life insurance policies?
Tax-deferred growth of cash value
ExplanationVariable life insurance policies offer tax-deferred growth of cash value.
#10
Who typically benefits the most from variable life insurance policies?
Policyholders with a high tolerance for investment risk
ExplanationVariable life insurance suits policyholders with high tolerance for investment risk.
#11
Which of the following is a potential disadvantage of variable life insurance?
Potential for loss of principal
ExplanationVariable life insurance carries a risk of principal loss.
#12
What is the primary source of the cash value in a variable life insurance policy?
Investment returns
ExplanationCash value in variable life insurance primarily stems from investment returns.
#13
What is the primary purpose of securities regulations regarding variable life insurance?
To protect consumers from investment risks associated with the policies
ExplanationSecurities regulations aim to safeguard consumers from investment risks in variable life insurance.
#14
Which of the following is a characteristic of variable life insurance policies?
The death benefit may fluctuate based on investment performance.
ExplanationVariable life insurance policies may see fluctuating death benefits based on investment performance.
#15
What happens if the investments within a variable life insurance policy perform poorly?
The policyholder may need to increase premiums to maintain coverage
ExplanationPoor investment performance may require policyholders to increase premiums for coverage.
#16
Which of the following is typically NOT covered by variable life insurance policies?
Surrender value
ExplanationSurrender value is typically not covered by variable life insurance policies.
#17
In variable life insurance, who assumes the investment risk?
The policyholder
ExplanationPolicyholders bear the investment risk in variable life insurance.
#18
What happens to the cash value of a variable life insurance policy upon the death of the policyholder?
It is transferred to the beneficiary tax-free.
ExplanationCash value of variable life insurance is tax-free when transferred to beneficiaries upon the policyholder's death.