Separate Accounts
Chapters in this video
- 0:00 The two vaults: general account versus separate account
- 1:05 How the general account works and its creditor exposure
- 1:41 Why the separate account is legally walled off and registered as a security
- 2:36 Prospects delivery, allocation, and subaccount mechanics
- 3:40 The taxable event trap: subaccount transfers versus withdrawals and surrenders
- 4:43 The guarantee trap: where promises live and where they do not
- 5:28 Rapid-fire exam recap
What this video covers
- Why the separate account is legally walled off from the insurer's general account and what that means for creditor protection
- How the general account bears insurer risk and guarantees, while the separate account bears investor risk with no guaranteed return
- Why the separate account is registered as an investment company under the Investment Company Act of 1940 and is therefore a security
- When Riley the Rep must deliver a prospectus: before or at the time of sale for any separate account transaction
- What subaccounts are, how they function like mutual funds, and that each has its own investment objective, portfolio manager, and expense ratio
- Why reallocating among subaccounts inside a variable annuity is NOT a taxable event, while withdrawals and surrenders ARE taxable events
- Where guarantees live (general account) versus where investments and risk live (separate account), and how to assign any exam fact to the correct account
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