Tennessee Insurance Practice Exam

What is required for a producer to sell Variable Life products?

1. A Property Insurance license

2. A Life Insurance license and a Securities license

3. No special licensing is needed

4. A Health Insurance license

The correct answer is: A Life Insurance license and a Securities license

To sell Variable Life products, a producer must hold a Life Insurance license as well as a Securities license. Variable Life insurance is a unique product that combines life insurance protection with an investment component. The investment aspect means that the cash value of the policy can fluctuate based on the performance of the underlying assets that the policyholder chooses, which typically include stocks, bonds, or mutual funds. The requirement for a Securities license arises because the investment component of Variable Life insurance falls under regulation by the Securities and Exchange Commission (SEC) and requires compliance with federal and state laws governing securities. This ensures that the producer is qualified to provide investment advice and understands the risks associated with securities products. Holding a Life Insurance license is necessary because Variable Life insurance is essentially a life insurance product. Without this license, a producer would not be authorized to engage in the sale of life insurance policies, which is a central aspect of Variable Life products. In contrast, a Property Insurance license is not applicable, as it pertains solely to property coverage, and a Health Insurance license is focused on health-related products. Both do not provide the necessary authority or knowledge to sell Variable Life policies. Lastly, stating that no special licensing is needed would overlook the regulatory framework that governs the sale of such financial instruments