Oklahoma Life Producer Practice Exam

Why is a securities license required for selling Variable Whole Life policies?

1. Due to the fixed nature of premiums

2. To oversee the cash value guarantee

3. Because of the investment component involved

4. To manage death benefit claims

The correct answer is: Because of the investment component involved

A securities license is required for selling Variable Whole Life policies primarily because these policies have an investment component that allows policyholders to allocate their premiums into various investment options, such as stocks and bonds. Unlike traditional whole life insurance, which offers a guaranteed death benefit and cash value accumulation, Variable Whole Life policies can fluctuate based on the performance of the underlying investments. This means that they are treated similarly to investment products rather than purely insurance products. The necessity for a securities license ensures that the individual selling these policies has received the proper training and understands the regulations that govern investment products. This license is crucial for protecting consumers by ensuring that those selling these complex financial instruments are knowledgeable about the risks involved in the investments, the potential for loss, and the need for adequate disclosures. Other options do not capture the essence of why a securities license is needed. While the fixed nature of premiums, cash value guarantees, and managing death benefit claims are important aspects of insurance policies, they do not pertain to the regulatory requirements for selling products that include a variable investment component. Thus, the focus on the investment aspect is central to understanding the requirement for a securities license.