Series 6 Exam Questions & Answers 2026 (21–30)

Question 1

Which regulatory body has PRIMARY jurisdiction over the separate account of a variable annuity offered to the public?

TheoryPractice · Accepted Answer

The Securities and Exchange Commission (SEC), because the separate account is registered as an investment company. The separate account of a variable annuity is registered as an investment company under the Investment Company Act of 1940, placing it under SEC jurisdiction, while the insurance wrapper itself remains subject to state insurance regulation.

Question 2

A client purchased a non-qualified variable annuity 10 years ago for $50,000. The account has grown to $90,000. He withdraws $15,000. Under LIFO tax treatment, how much of the $15,000 withdrawal is subject to ordinary income tax?

TheoryPractice · Accepted Answer

$15,000, because gains are deemed distributed first under LIFO rules. Non-qualified annuity withdrawals follow last-in, first-out (LIFO) treatment for tax purposes, meaning earnings are considered withdrawn before principal; since the $40,000 gain exceeds the $15,000 withdrawal, the entire $15,000 is taxable as ordinary income.

Question 3

An investor compares a variable annuity with a 1.40% annual mortality and expense (M&E) risk charge to a no-load index mutual fund with a 0.05% expense ratio. The variable annuity offers a guaranteed minimum income benefit (GMIB) rider for an additional 0.60% annually. Which statement BEST reflects proper suitability analysis under Regulation Best Interest?

TheoryPractice · Accepted Answer

The representative must evaluate whether the GMIB rider's income guarantee is worth the combined 2.00% cost premium over the mutual fund given the client's specific income needs, risk tolerance, and time horizon. Regulation Best Interest requires a holistic cost-benefit analysis specific to the customer's profile; the higher cost of the variable annuity may or may not be justified depending on whether the GMIB and tax-deferral features provide sufficient value for that particular client.

Question 4

Which of the following statements correctly describes the difference between variable annuities and variable life insurance with respect to the death benefit?

TheoryPractice · Accepted Answer

Variable life insurance provides a guaranteed minimum death benefit, while a variable annuity's death benefit is typically the greater of account value or premiums paid minus withdrawals. Variable life insurance guarantees a minimum death benefit (face amount), while variable annuity death benefits are typically the greater of the current account value or a return-of-premium floor, reflecting the different guarantees embedded in each product.

Question 5

A variable annuity contract owner wants to transfer funds from a bond subaccount to an equity subaccount within the same annuity contract. Which of the following BEST describes the tax treatment of this transaction?

TheoryPractice · Accepted Answer

The transfer is not a taxable event because it occurs within the tax-deferred annuity contract. Transfers between subaccounts within a single variable annuity contract are not taxable events; the tax-deferred status of the annuity wrapper means no tax is incurred until actual distributions are taken from the contract.

Question 6

A 72-year-old retiree with moderate risk tolerance, a pension covering living expenses, and a desire to leave assets to her grandchildren asks about a variable annuity with a guaranteed minimum withdrawal benefit (GMWB) rider. Her representative recommends it primarily for the death benefit pass-through feature. Under Reg BI, which consideration is MOST relevant to evaluating this recommendation?

TheoryPractice · Accepted Answer

Whether the client has sufficient liquidity outside the annuity, given surrender charges may restrict access to funds she might need, and whether the estate-planning benefit justifies the M&E and rider costs at her age. Reg BI's care obligation requires the representative to assess liquidity needs, costs, and whether the specific benefits sought (estate planning/death benefit) genuinely serve the client's interests relative to lower-cost alternatives, especially given the client's age and the long surrender period.

Question 7

The assumed interest rate (AIR) in a variable annuity serves as a benchmark during the annuity payout phase. If in a given month the actual subaccount performance EQUALS the AIR, what happens to the annuity payment compared to the previous month?

TheoryPractice · Accepted Answer

The payment remains the same as the prior month's payment. When actual investment performance exactly equals the AIR, annuity payments remain unchanged from the prior period; payments rise only when performance exceeds the AIR and fall when performance is below it.

Question 8

Which of the following is a TRUE statement about the accumulation phase of a variable annuity?

TheoryPractice · Accepted Answer

The contract owner bears the investment risk, as the value of accumulation units fluctuates with subaccount performance. During the accumulation phase the contract owner assumes full investment risk; the number of accumulation units stays constant with each premium payment while the unit value rises or falls based on the performance of the chosen subaccounts.

Question 9

A registered representative's client owns a variable annuity purchased 18 months ago. The client wants to do a 1035 exchange into a new variable annuity from a different carrier that has a lower M&E charge. The new contract resets the surrender charge schedule to 7 years. The client is 55 years old. Which of the following is the MOST critical disclosure the representative must make?

TheoryPractice · Accepted Answer

The client will restart a new surrender charge period, potentially locking up funds for 7 additional years, and the cost savings from lower M&E charges must be weighed against this loss of liquidity and any features forfeited from the original contract. FINRA rules on variable annuity exchanges (per FINRA Rule 2330) require disclosure of the costs and consequences of the new contract including the reset surrender schedule, and the representative must demonstrate that the exchange is in the client's best interest, not merely advantageous to the rep.

Question 10

Variable universal life (VUL) insurance differs from traditional variable life insurance primarily in which way?

TheoryPractice · Accepted Answer

VUL offers flexible premium payments and an adjustable death benefit, while traditional variable life has fixed scheduled premiums and a guaranteed minimum death benefit. Variable universal life combines the investment flexibility of variable life (subaccount allocation) with the premium and death benefit flexibility of universal life, allowing adjustable premiums and death benefit amounts, whereas traditional variable life requires fixed scheduled premiums.

Series 6 Exam Questions & Answers 2026 (21–30)

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