Series 6 Practice Exam – Focus on Variable Contracts

🧾 Series 6 Practice Exam – Focus on Variable Contracts
📘 Sharpen Your Understanding of Variable Annuities and Variable Life Products

The Series 6 exam tests your ability to sell packaged securities, including mutual funds, variable annuities, and variable life insurance products. Below is a 10-question practice exam focused specifically on variable contracts, a high-yield topic on the test.

✅ Instructions:

• Simulate real testing conditions: time yourself (12–15 minutes total)
• Choose the best answer for each question
• Review the answer key and explanations at the end

🔢 Variable Contracts – Practice Questions

1. Which of the following best describes a variable annuity?

A) A fixed insurance product with guaranteed returns
B) An equity-linked insurance product with investment risk borne by the insurer
C) A product offering tax-deferred growth and investor-controlled investment options
D) A government-backed retirement account

2. What is the main reason variable annuities are considered securities?

A) Because they include a death benefit
B) Because their returns are based on the performance of separate account investments
C) Because they are regulated by state insurance commissions
D) Because they are exempt from federal registration

3. In a variable annuity, what is the purpose of the “separate account”?

A) To pay commissions to the representative
B) To guarantee a minimum rate of return
C) To hold investments chosen by the insurer
D) To hold subaccounts that reflect the performance of selected investments

4. When selling a variable annuity to a client, a registered representative must:

A) Only be licensed with the state insurance department
B) Hold a Series 6 or 7 and a state insurance license
C) Be sponsored by the SEC
D) Provide investment advice for a fee

5. Which of the following variable annuity features is most attractive to clients seeking tax efficiency?

A) Unlimited withdrawals
B) Tax-deferred growth
C) Fixed monthly income
D) Immediate liquidity

6. Which of the following statements about variable life insurance is TRUE?

A) Premiums and death benefit are both fixed for the life of the policy
B) Policyholders can invest in a separate account with potential for higher returns
C) Variable life is not considered a security
D) Cash value is not affected by investment performance

7. A client wants a life insurance policy with both a death benefit and potential investment growth. Which product best fits?

A) Term life insurance
B) Whole life insurance
C) Variable life insurance
D) Fixed annuity

8. Before recommending a variable annuity to a client, you must:

A) Determine if the client is under age 59½
B) Ensure the client already owns mutual funds
C) Conduct a suitability review including investment objectives and risk tolerance
D) Confirm the annuity is offered by a bank

9. What document must be delivered before or at the time of a variable annuity sale?

A) Insurance company brochure
B) Annual report
C) Prospectus
D) Privacy notice

10. A major disadvantage of variable annuities is:

A) They do not offer any death benefit
B) They are not suitable for retirement planning
C) They often have high surrender charges and fees
D) Their performance is guaranteed

🧠 Answer Key + Explanations

1. ✅ C – Variable annuities offer tax-deferred growth and investment flexibility, with risks borne by the investor.
2. ✅ B – Variable annuities are securities because their value is tied to separate account investments.
3. ✅ D – The separate account holds investment subaccounts (mutual fund-like options) and varies with market performance.
4. ✅ B – You need both a Series 6 or 7 license and a state insurance license to sell variable annuities.
5. ✅ B – The tax-deferred growth of variable annuities is one of their primary selling points.
6. ✅ B – Variable life policies allow policyholders to invest in a separate account; cash value is tied to investment performance.
7. ✅ C – Variable life insurance offers both a death benefit and investment potential.
8. ✅ C – Representatives must perform a suitability analysis before recommending any annuity.
9. ✅ C – A prospectus must be delivered at or before the time of sale.
10. ✅ C – Surrender charges and high internal fees are common drawbacks of variable annuities.

📊 Scoring Guide

• 9–10 correct: You’ve mastered this section!
• 7–8 correct: Good understanding, review explanations to strengthen.
• 5–6 correct: Needs review – revisit core concepts of variable products.
• Below 5: Revisit variable annuity and variable life contract basics.

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