3.7.1 Variable Insurance Products
To sell variable insurance products, an individual must hold a life insurance license and a Financial Industry Regulatory Authority (FINRA) registered representative's license. In Florida, agents who have fully satisfied the requirements for a life insurance license, including successful completion of a licensing exam that covers variable annuities, may sell or solicit variable annuity contracts.
Variable insurance products are considered securities contracts as well as life contracts and contain no contract value guarantees. The insurer guarantees a minimum rate of return to be credited to the policy's cash value (funds invested through the insurer's general account). The policyholder assumes any additional investment risk.
What is variable life insurance?
Variable life insurance refers to a relatively new form of whole life insurance being sold in the United States. Instead of the traditional fixed face value and cash surrender values, the variable life insurance contract varies these benefits to reflect the investment experience of a separate pool of equity investments supporting the reserves for such policies. These contracts were designed to counteract the effects of inflation on the value (purchasing power) of fixed face amount whole life policies.
Variable insurance products are regulated by both the state and the SEC as securities. A prospectus (information on the nature and purpose of the plan with full disclosure, the separate account and risk) approved by the SEC must be provided by law at the time of presentation. General accounts are composed of conservative investments constructed to match the liabilities and guarantees of the contracts they back.
- Variable Life - Funds invested in higher risk separate accounts.
- Variable Universal Life - Premium flexibility, cash value investment control, and death benefit flexibility. Separate accounts are composed of common stock, bond, money market, and other securities investment options.
