A registered representative is explaining the structural mechanics and regulatory features of variable annuity contracts to a prospective investor. When detailing how the separate account functions relative to the insurance company's general account, which of the following statements are CORRECT?
- Assets held within the separate account are legally segregated from the insurer's general account and protected from claims by general creditors of the insurance company.Cevap
- BAllocating contract values across multiple subaccounts in the separate account eliminates market risk for the investor.
- Contract owners maintain voting rights regarding separate account investment policies and board members proportional to their accumulation units.Cevap
- DPartial surrenders from subaccounts prior to age 59½ are exempt from the 10% IRS tax penalty as long as the distribution amount is less than the surrender charge assessed by the insurer.
Cevap
The correct statements are that separate account assets are legally segregated from the insurer's general liabilities and that contract owners retain proportional voting rights regarding separate account policies.
The correct statements reflect fundamental rules governing variable annuity separate accounts under federal securities laws. Assets in the separate account are kept separate from the insurance company's general account to protect contract holders from the insurer's insolvency risks. Additionally, because separate accounts operate like mutual funds under the Investment Company Act of 1940, contract owners are granted voting privileges on key management and investment policy decisions based on their accumulation unit holdings.
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Variable Annuity Separate Account Structure and Governance
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