Requirements to Sell Variable Life Insurance

If your clients are hoping to achieve higher investment returns inside of a whole life policy, variable life insurance may be a good option for them to consider. Variable life insurance is a type of whole life insurance, but it offers your clients several benefits that they cannot get with ordinary whole life policies. To sell variable life insurance, you must follow special regulations and obtain specific licensing.



Variable life insurance offers permanent life insurance protection. It's similar in function to ordinary whole life insurance, except that it invests the premiums in mutual fund sub-accounts. (A mutual fund pools a collection of stocks or bonds into a single investment product.)


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Licensing Requirements

Selling variable life insurance requires a state life insurance license, a series 6 license and a series 63 license. All states mandate these licenses, which allow holders to sell financial products that use or contain mutual funds and other variable-return securities. To maintain your series 6 and 63 licenses, you must complete continuing education and testing every business quarter. You must also complete continuing education and testing to maintain your life insurance licensing (every two years, typically). Most states mandate combined continuing education credits of 15 to 30 credit hours for these licenses.


Prospectus Requirements

To sell variable life insurance, you must provide special sales material and literature to your clients. This literature is called a prospectus; it discloses the fees and the investment objectives of the mutual funds in the policy. It also discloses how the mutual funds work, and what type of investments they will make to achieve the desired returns.


Suitability Requirements

Variable life insurance is subject to Financial Industry Regulatory Authority (FINRA) and U.S. Securities and Exchange Commission (SEC) laws on suitability. For this reason, you must complete a suitability test with your client to determine your client's risk tolerance. Since variable life insurance involves investments that can lose money and cause the life insurance policy to lapse, you must make every reasonable attempt to verify that your client is financially and psychologically capable of withstanding downturns in his investments. An asset allocation questionnaire is a standard method of suitability testing. The client must also sign paperwork acknowledging that he understands the risks of investing in a variable life insurance policy.


Other Considerations

Consider whether you can do enough business to warrant obtaining additional licensing for variable life insurance sales. Make sure your client base already has an interest in this product, and that you can do enough business to cover all your regulatory and licensing fees. Otherwise, it may not be worth the money and time to obtain the additional licensing. Also, note that brokerage firms that offer variable life insurance often have production requirements that you must meet. If you don't sell enough product, you may be subject to a penalty. In some cases, the brokerage may even terminate your contract, preventing you from selling variable life insurance with that brokerage.


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