FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationRegulatory Fundamentals and General Product KnowledgeMedium
A registered representative is explaining the concept of a 'scheduled premium variable life' policy to a client. Which of the following is a distinguishing characteristic of this type of policy?
- AThe death benefit is constant and guaranteed, regardless of separate account performance.
- BThe policy requires fixed, periodic premium payments, similar to traditional whole life.
- CPremiums can be adjusted by the policyholder at any time without restriction.
- DThe cash value growth is guaranteed at a minimum annual rate.
Show answer & explanationAnswer & explanation
Correct answer: B. The policy requires fixed, periodic premium payments, similar to traditional whole life.
Scheduled premium variable life policies are characterized by their requirement for fixed, periodic premium payments. While the cash value and death benefit can fluctuate based on separate account performance, the premium payment schedule is set.
Why the other options are wrong
- A. While there's a guaranteed minimum death benefit, the actual death benefit can increase above this minimum based on separate account performance.
- C. Adjustable premiums are characteristic of universal variable life, not scheduled premium variable life.
- D. Cash value growth is NOT guaranteed; it fluctuates with the performance of the separate account.
Scheduled Premium Variable Life
A variable life insurance policy that requires fixed, periodic premium payments, with a death benefit and cash value that fluctuate based on the performance of the separate account.
- Fixed, periodic premiums
- Cash value fluctuates with separate account
- Death benefit can increase (minimum guaranteed)
- Policyholder bears investment risk
Memory trick: Scheduled life has 'fixed' payments, like a 'fixed' calendar date.