12-GA-62 Variable Products Practice Exam -
Questions with Correct Answers & Explanations
| Graded A+ Study Guide.
Question 1
What is the primary characteristic that distinguishes a variable life insurance policy from
a fixed premium whole life policy?
A) Variable life has guaranteed cash values while whole life does not
B) The death benefit and cash values fluctuate according to the investment performance
of a separate account
C) Variable life premiums are always lower than whole life premiums
D) Whole life policies cannot have loans while variable life policies can
Correct Answer: B
Question 2
In a variable life insurance policy, the minimum death benefit is:
A) Not guaranteed and can fall to zero
B) Guaranteed regardless of separate account performance
C) Always equal to the cash value
D) Determined solely by the policyowner's age
Correct Answer: B
Question 3
Which of the following best describes the "separate account" in a variable life insurance
policy?
A) A savings account at a bank owned by the policyowner
B) An account that is part of the insurer's general assets, invested conservatively in
bonds
,C) A segregated portfolio of investments, typically stocks and bonds, held apart from
the insurer's general account
D) A checking account used to pay monthly premiums
Correct Answer: C
Question 4
What is the primary difference between fixed premium variable life and flexible premium
variable life?
A) Fixed premium variable life is not regulated in Georgia
B) Flexible premium variable life (VUL) allows policyowners to adjust premium payments
within limits, while fixed premium requires scheduled level payments
C) Fixed premium variable life has no death benefit guarantee
D) Flexible premium variable life cannot be sold to Georgia residents
Correct Answer: B
Question 5
Which investment option is typically NOT available in a variable life separate account?
A) Common stock funds
B) Bond funds
C) Money market funds
D) A guaranteed fixed account with no market risk within the separate account
Correct Answer: D
Question 6
Under Georgia law, which regulatory body must license an agent to sell variable life
insurance products?
A) The Securities and Exchange Commission (SEC) only
B) The Financial Industry Regulatory Authority (FINRA) only
C) The Georgia Commissioner of Insurance AND appropriate securities licensing (FINRA
,registration)
D) The Federal Deposit Insurance Corporation (FDIC)
Correct Answer: C
Question 7
The free look period in a variable life insurance contract is:
A) A period when premiums are waived
B) A specified number of days after delivery during which the owner can return the
policy for a full refund
C) The time before the policy takes effect
D) A guaranteed loan period
Correct Answer: B
*Explanation: The free look period allows new policyowners to review their contract and
return it for a full refund if dissatisfied, typically 10-30 days depending on state law .*
Question 8
What is the primary tax advantage of variable life insurance compared to a taxable
investment account?
A) Premiums are fully tax-deductible
B) Cash value accumulation grows tax-deferred, and death benefits are generally income
tax-free to beneficiaries
C) No surrender charges ever apply
D) Investment gains are taxed annually as capital gains
Correct Answer: B
Question 9
If a variable life insurance policy lapses due to insufficient cash value to cover charges,
what option might be available to the policyowner?
A) Automatic loans from the general account
B) A reduced paid-up non-participating life insurance policy
C) Immediate return of all premiums paid
D) Conversion to a fixed annuity
, Correct Answer: B
Question 10
The mortality and expense risk charge (M&E charge) in a variable life policy covers:
A) The investment management fees of the separate account
B) The insurer's risk that policyholders will die sooner than expected and that expenses
exceed projections
C) State premium taxes only
D) The agent's commission exclusively
Correct Answer: B
Domain 2: Variable Annuities – Accumulation and Distribution
Phases (25%)
Question 11
What is the "assumed investment rate" (AIR) in a variable annuity contract?
A) The guaranteed minimum interest rate the insurer will pay
B) The actual rate of return earned by the separate account
C) An interest rate assumption used to calculate the initial annuity payment and
subsequent payment adjustments
D) The maximum rate the separate account can earn
Correct Answer: C
Question 12
What is an accumulation unit in a variable annuity during the accumulation phase?
A) A guaranteed fixed-dollar credit to the policy
B) An accounting measure representing the policyowner's share of the separate
Questions with Correct Answers & Explanations
| Graded A+ Study Guide.
Question 1
What is the primary characteristic that distinguishes a variable life insurance policy from
a fixed premium whole life policy?
A) Variable life has guaranteed cash values while whole life does not
B) The death benefit and cash values fluctuate according to the investment performance
of a separate account
C) Variable life premiums are always lower than whole life premiums
D) Whole life policies cannot have loans while variable life policies can
Correct Answer: B
Question 2
In a variable life insurance policy, the minimum death benefit is:
A) Not guaranteed and can fall to zero
B) Guaranteed regardless of separate account performance
C) Always equal to the cash value
D) Determined solely by the policyowner's age
Correct Answer: B
Question 3
Which of the following best describes the "separate account" in a variable life insurance
policy?
A) A savings account at a bank owned by the policyowner
B) An account that is part of the insurer's general assets, invested conservatively in
bonds
,C) A segregated portfolio of investments, typically stocks and bonds, held apart from
the insurer's general account
D) A checking account used to pay monthly premiums
Correct Answer: C
Question 4
What is the primary difference between fixed premium variable life and flexible premium
variable life?
A) Fixed premium variable life is not regulated in Georgia
B) Flexible premium variable life (VUL) allows policyowners to adjust premium payments
within limits, while fixed premium requires scheduled level payments
C) Fixed premium variable life has no death benefit guarantee
D) Flexible premium variable life cannot be sold to Georgia residents
Correct Answer: B
Question 5
Which investment option is typically NOT available in a variable life separate account?
A) Common stock funds
B) Bond funds
C) Money market funds
D) A guaranteed fixed account with no market risk within the separate account
Correct Answer: D
Question 6
Under Georgia law, which regulatory body must license an agent to sell variable life
insurance products?
A) The Securities and Exchange Commission (SEC) only
B) The Financial Industry Regulatory Authority (FINRA) only
C) The Georgia Commissioner of Insurance AND appropriate securities licensing (FINRA
,registration)
D) The Federal Deposit Insurance Corporation (FDIC)
Correct Answer: C
Question 7
The free look period in a variable life insurance contract is:
A) A period when premiums are waived
B) A specified number of days after delivery during which the owner can return the
policy for a full refund
C) The time before the policy takes effect
D) A guaranteed loan period
Correct Answer: B
*Explanation: The free look period allows new policyowners to review their contract and
return it for a full refund if dissatisfied, typically 10-30 days depending on state law .*
Question 8
What is the primary tax advantage of variable life insurance compared to a taxable
investment account?
A) Premiums are fully tax-deductible
B) Cash value accumulation grows tax-deferred, and death benefits are generally income
tax-free to beneficiaries
C) No surrender charges ever apply
D) Investment gains are taxed annually as capital gains
Correct Answer: B
Question 9
If a variable life insurance policy lapses due to insufficient cash value to cover charges,
what option might be available to the policyowner?
A) Automatic loans from the general account
B) A reduced paid-up non-participating life insurance policy
C) Immediate return of all premiums paid
D) Conversion to a fixed annuity
, Correct Answer: B
Question 10
The mortality and expense risk charge (M&E charge) in a variable life policy covers:
A) The investment management fees of the separate account
B) The insurer's risk that policyholders will die sooner than expected and that expenses
exceed projections
C) State premium taxes only
D) The agent's commission exclusively
Correct Answer: B
Domain 2: Variable Annuities – Accumulation and Distribution
Phases (25%)
Question 11
What is the "assumed investment rate" (AIR) in a variable annuity contract?
A) The guaranteed minimum interest rate the insurer will pay
B) The actual rate of return earned by the separate account
C) An interest rate assumption used to calculate the initial annuity payment and
subsequent payment adjustments
D) The maximum rate the separate account can earn
Correct Answer: C
Question 12
What is an accumulation unit in a variable annuity during the accumulation phase?
A) A guaranteed fixed-dollar credit to the policy
B) An accounting measure representing the policyowner's share of the separate
