Products & Their RisksQuestion 78 of 398
A variable annuity differs from a fixed annuity primarily because the variable annuity:
a.Guarantees both principal and a fixed monthly payment
b.Invests premiums in a separate account, so payouts vary with investment performance and the investor bears the risk
c.Is not considered a security and requires no prospectus
d.May only be sold by insurance agents without a securities license
Explanation
A variable annuity invests contributions in a separate account holding subaccounts of securities, so the value and payouts fluctuate with investment performance and the contract owner bears the investment risk. Because of this securities exposure, a variable annuity is both an insurance product and a security, requiring a prospectus and a securities registration to sell.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
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