Variable products
Variable Annuity Definition
Definition
A variable annuity is an insurance company contract whose value and payments can vary based on separate-account investment performance.
Why it matters on the Series 7
The Series 7 tests variable annuities through tax deferral, surrender charges, mortality and expense costs, investment risk, death benefits, and suitability for long-term investors.
Example
A customer seeking long-term tax-deferred growth may evaluate a variable annuity, but a customer needing short-term liquidity may be a poor fit because of surrender charges and expenses.
Common mistakes
- Treating a variable annuity as risk-free because an insurance company issues it.
- Ignoring surrender periods and liquidity needs.
- Recommending it inside a tax-advantaged account without explaining why added annuity costs are justified.