Insurance Commission VUL Reviewer_FEB2024 Flashcards
Which of the following statements about the option to top-up under variable life insurance products is FALSE?
a. To top-up a policy, the policy owner pays further single premium at the time of top-up.
b. Policyowner may buy additional units in the variable life fund and these units will be
allocated to new variable life insurance policies.
c. Further premiums at time of top-up will be used in full, after deducting charges for top ups, to purchase additional units of the variable life funds.
d. Policyowners are normally allowed to top-up their policies at any time, subject to a minimum amount
b. Policyowner may buy additional units in the variable life fund and these units will be
allocated to new variable life insurance policies.
What are the disadvantages when investing in common shares?
I. Dividends are paid not more than fixed rates.
II. Investors are exposed to market and specific risks.
III. Shares can become worthless if company becomes insolvent.
a. I, and II
b. I, and III
c. II, and III
d. I, III, and III
c. II, and III
Which of the following statements about the flexibility features of variable life policies is FALSE?
a. Policyholders may request for a partial withdrawal of the policy and the withdrawal
amount will be met by cashing the units at bid price.
b. Policyholders can take loans against their variable life policies up to the entire
withdrawal value of their policies.
c. Policyholders have the flexibility of switching from one fund to another, provided it
satisfies the company’s switching criteria.
d. Policyholders have the flexibility of increasing or decreasing their premiums for regular
premiums variable life policies.
b. Policyholders can take loans against their variable life policies up to the entire
withdrawal value of their policies.
What is the most suitable investment instrument for someone who is interested in protecting his principal, while receiving a steady stream of income?
a. Equities
b. Warrants
c. Variable Life Policies
d. Fixed Income Securities
d. Fixed Income Securities
The switching facility under variable life insurance policies is very useful _____.
a. For the purpose of profit planning by the life policies
b. For the purpose of assets planning by the trustee
c. For the purpose of financial planning by the policy owners
d. For the purpose of sales planning by fund managers
c. For the purpose of financial planning by the policy owners
A unit trust is ____.
a. Established by a trust deed, which enables a trustee to hold the pool of money and
assets in trust on behalf of the investor.
b. A close-end fund, and does not have to dispose of its assets if a large number of
investors sell their shares.
c. One whereby an investor buys units in the trust itself and not shares in the company.
d. An organization registered under the Securities and Exchange Commission (SEC) which
usually invests in a wide range of equities and other investments.
a. Established by a trust deed, which enables a trustee to hold the pool of money and
The following are characteristics of a variable life insurance policy
I.
Its withdrawal value and protection benefits are determined by the investment
performance of the underlying assets.
II. Its protection costs are generally met by implicit charges.
III. Its commissions and company expenses are met by a variety of explicit charges, notice
of which is given by life companies normally 6 months prior to any change in such
charges.
IV. Its withdrawal value is normally the value of units allocated to the policyholder calculated at the bid price
a. I, II and IV
b. II, III and IV
c. I, II and III
d. I, III and IV
a. I, II and IV
Which of the following statements are TRUE?
I.
The policy value of variable life policies is determined by the offer price at the time of
valuation.
II. The policy value of endowment policies is the cash values plus any accumulated
dividends less any outstanding loans due at time of surrender.
III. The life company needs to maintain a separate account for variable life policies distinct from the general account.
a. II and III
b. I, II, and III
c. I and III
d. I
a. II and III
Variable life insurance policy owners may withdraw in terms of ____.
a. Number of units or fixed monetary amount through cancellation of units.
b. Number of units or fixed monetary amount though reduction of the life cover sum assured.
c. Fixed monetary amount only through reduction of the life cover sum assured.
d. Number of units through cancellation of units.
a. Number of units or fixed monetary amount through cancellation of units.
Which of the following statements are fixed income securities?
I. Corporate Stocks
II. Government Bonds
III. Preferred Shares
IV. Money Market Instruments
V.Properties
a. I, II, III, and IV
b. I and III
c. I, II, and V
d. All of the above
a. I, II, III, and IV
Which of the following investment options entitle the holder ownership and share of profits in the form of dividend appreciation?
a. Cash
b. Bonds
c. Futures
d. Ordinary Shares
d. Ordinary Shares
Factors to consider in buying Properties:
I.
Quality of land
II. The location of land
III. The value of building on land
IV. The investment
V. Place of work
a. I, II, and III
b. II, III, and IV
c. I, III, and V
d. All of the above
a. I, II, and III
What are the types of real estate investment?
I. Rural Property
II. Domestic Property
III. Agricultural Property
IV. Commercial/Industrial Property
V. Foreign Property
a. I, II, and III
b. II, III, and IV
c. I, III, and V
d. All of the above
b. II, III, and IV
The difference between the offer price and the bid price is:
a. Bid-offer spread
b. Offer price spread
c. Bid price spread
d. None of the above
a. Bid-offer spread
Which of the following information must NOT be conveyed to the client in the sale of Variable Life insurance policies?
a. Rate of return
b. Time horizon of the product
c. Benefits illustrations using the 10% as the gross
d. Guaranteed interest rate
d. Guaranteed interest rate
The disadvantage of fixed income securities include:
I. The coupon rate is fixed and cannot respond to inflation.
II. The investors are exposed to market specific risks.
III. Fluctuations in bond prices may lead to capital losses.
a. II and III
b. I and II
c. I, II, and III
d. I and III
b. I and II
The amount of risk a person can take depends on:
I. Age
II. Investment Objectives
III. Financial conditions
IV. Personality
a. I and II
b. II, III, and IV
c. None of the above
d. All of the above
d. All of the above
An investor in variable life funds gets to enjoy these benefits:
I. Policy owners have access to pooled or diversified portfolios of investment.
II. Policy owners can easily change the level of the premium payments as the product
design of variable life insurance policies have clear structures which cater separately for investment and insurance protection.
III. Policy owners can gain access to variable life funds managed by professional investment managers with proven track records.
IV. Policy owners can buy a variable life insurance policy only with a high initial investment.
a. I, II, and IV
b. I, III, and IV
c. I, II, and III
d. II, III, and IV
c. I, II, and III
Which of the following statements about rebating is/are TRUE ?
I. Rebating is prohibited under the Insurance Code.
II. Rebating deals with offering the prospect a special inducement to purchase a policy.
III. Rebating will enhance the sales performance and uphold the prestige of an agent.
a. I and II
b. I and III
c. II and III
d. III
a. I and II
Which of the following statements are FALSE?
I. Higher capital gain is normally associated with lower risk.
II. One way to lower risk in investment is to diversify.
III. One method of measuring risk is to determine the average return and its standard deviation from future data.
IV. Diversification can be achieved by investing in different countries and/or types of assets
V. An investor can always choose an investment that is risk free.
a. I, II, and III
b. II, III, and IV
c. I, III, and V
d. All of the above
c. I, III, and V
Which of the following statements is FALSE?
a. Variable life insurance policies offer investors plans with values that are indirectly linked to the investment performance of the life company.
b. A life insurance company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholders as cash dividends.
c. Both Whole Life and Endowment policies can be used as an investment media with
benefits that become payable at a future date.
d. The investment element of variable life policies varies according to underlying assets of
portfolio.
a. Variable life insurance policies offer investors plans with values that are indirectly linked to the investment performance of the life company.
Which of the following statements about single premium variable life policy are TRUE?
I. There is no fixed term in a single premium variable life policy, and therefore, they are
technically whole life insurance.
II. Top-up single premium injections are allowed in these plans.
III. Policyholders have the flexibility of varying the life coverage.
a. I, II, and III
b. II and III
c. I and II
d. I and III
b. II and III
Which of the following are types of corporate stocks?
I. Debenture stocks
II. Government stocks
III. Loan stocks
IV. Money Market Instruments
V. Convertible stocks
a. I, II, and III
b. I, II, III, and IV
c. I, III, and V
d. All of the above
c. I, III, and V
Which of the following statements about variable life policies is/are TRUE?
I. The cash withdrawal value is not guaranteed.
II. The volatility of the returns depends on the investment strategy of the fund.
III. The variable life policyholder has direct control over the investment decisions of the
variable life fund.
a. I, II, and III
b. I and II
c. I and III
d. II and III
b. I and II
Which of the following statements about variable life policies are TRUE?
I. Variable life policies generally have larger exposure to equity investment than with
participating and other traditional policies.
II. The protection costs are generally met by implicit charges, which vary with age and level of cover.
III. Commissions and company expenses are met by a variety of explicit charges, some of
which are variable.
a. I, II, and III
b. I and II
c. II and III
d. I and III
b. I and II
The facility to do switching under a variable life insurance policy is a very useful ____.
a. For the purpose of profit planning by the life policies
b. For the purpose of assets planning by the trustee
c. For the purpose of sales planning by the fund managers
d. For the purpose of financial planning by the policy owners
d. For the purpose of financial planning by the policy owners
Which of the following is/are TRUE about the flexibility benefit of investing in variable life funds?
I. Policy owners can easily change the level of sum assured and switch their investment
between funds.
II. Policy owners can easily take premium holidays and add single premium to top-ups.
III. Variable life insurance products have a single product design with a clear structure which
cater separately for investment and insurance protection.
IV. Policy owners can easily change the level of their premium payment.
a. All of the above
b. I, II, and III
c. I, II, and IV
d. I, III, and IV
c. I, II, and IV
Which of the following statements about risks of investing in variable life funds is TRUE?
a. Investment in variable life funds which are fully invested in units of equity is not suitable for policyowners who can tolerate the risks of short term fluctuations in their account value.
b. Policyowners who are risk averse should buy variable life insurance policies with high
equity investment.
c. Policyowners who are risk averse should not purchase life insurance policies with high protection and guaranteed cash and maturity values
d. Policyowners who invest in variable life funds with high equity investment face greater risk, but can expect to achieve higher return than the traditional life insurance product over the long term.
d. Policyowners who invest in variable life funds with high equity investment face greater risk, but can expect to achieve higher return than the traditional life insurance product over the long term.
What would be the withdrawal value after a year?
Offer price = Ps 16.00
Bid-offer spread = 4.5%
Number of Units bought = 25,000 units
Policy Fee = Ps. 1,800
Admin and Mortality Charge = Ps. 8,750
Top-Up Fee = Ps. 700
Admin for Top-Up = Ps. 2,000
Sum assured is 190% of single premium of the value of the units, whichever is higher.
Assumptions:
- Charges and fees are deducted after the single premium has been invested into the
account. - The growth rate of the unit price and the bid-offer spread is maintained at 8% and 4.5% respectively.
a. Ps. 432,000.00
b. Ps. 420,069.02
c. Ps. 401,107.58
d. Ps. 412,500.00
c. Ps. 401,107.58
Which of the following statements about an investor diversifying his portfolio is FALSE?
a. A diversified portfolio provides greater security to an investor having to sacrifice the
return for the portfolio.
b. A diversified portfolio can completely eliminate the risk of investing the stocks in a
portfolio.
c. A diversified portfolio can involve purchasing different types of stocks and investing in stocks of different countries.
b. A diversified portfolio can completely eliminate the risk of investing the stocks in a
portfolio.
In Traditional Participating Life insurance products, the allocations to policy owners in the form of dividends ____.
I. Are not directly linked to the life company’s investment performance
II. Have already been smoothened by the life company
III. Do not have the highs and lows of investment returns as in good investment years of the life company
IV. Are not fixed at the inception of the policy, but are greatly dependent on the investment performance of the life company.
a. I and II only
b. I, II, and III
c. I, II, and IV
d. II, III, and IV
d. II, III, and IV
Which of the following statements is TRUE about cash?
a. It has high yield potential.
b. Amount invested in cash depends on the size of the cash flow requirement.
c. Investment in cash increases when there is a bull run in the stock market.
d. Investment in cash decreases when interest rates rise.
b. Amount invested in cash depends on the size of the cash flow requirement.
Which of the following are main characteristics of variable life policies?
I. The policies can be used for investment, as a source of regular savings and protection.
II. The withdrawal values and protection benefits are determined by the investment
performance of the underlying assets.
III. The net cash values of the policies are the gross cash values shown in the policy that
includes dividends up to the date of surrender, less any indebtedness including interest.
a. II
b. I
c. I, II, and III
d. I and II
d. I and II
The duties of the trustee of unit investment trust do not include
a. Managing the portfolio of investment and administering the buying and selling of shares
in the unit trust itself
b. Ensuring that the fund manager adhere to the provision of trusts deeds
c. Acting generally to protect the unit-holders
d. Holding the pool of money and assets in trust in behalf of the investors
a. Managing the portfolio of investment and administering the buying and selling of shares
The policy fee payable by a variable life insurance policy owner is to cover ____.
a. The handling charges by professional investment managers
b. The prices for each unit bought under the variable life insurance policy
c. The mortality costs of the variable life insurance policy
d. The administrative expenses of setting up the variable life insurance policy
d. The administrative expenses of setting up the variable life insurance policy
In risk-return profile of bond funds, cash funds, managed funds, balanced funds, and equity
funds, a risk-return graph will show that ____.
I. Higher return normally comes with lower risk.
II. Higher return normally comes with higher risk.
III. At the top end of the graph are the equity funds.
IV. The relatively risk-less cash funds sit at the bottom end of the graph.
a. I, II, and III
b. II, III, and IV
c. I, II, and IV
d. I, III, and IV
b. II, III, and IV
Variable life funds can be invested in any financial instruments including bond funds, property
funds, specialized funds, and equity funds. Equity funds ____.
a. Invest in shares of stocks and the magnitude of the change in unit prices will only depend
on the quantity of the equities held
b. Invest in shares of stocks and during market recession, such assets are usually the last to
depreciate
c. Invest in share of stocks which are inherently of lower risk in nature and the prices of
stocks are stable
d. Invest in share of stocks and investor who buys such assets usually aims for capital
appreciation
d. Invest in share of stocks and investor who buys such assets usually aims for capital
appreciation
The investment returns under variable life insurance _____.
I. Are not guaranteed
II. Are assured
III. Are linked to the performance of the investment fund managed by the life company
IV. Fluctuate according to the rise and fall of the market prices
a. I, II, and III
b. I, II, and IV
c. I, III, and IV
d. II, III, and IV
c. I, III, and IV
Which of the following statements is FALSE?
a. Rebating is to offer a prospect a special inducement to purchase a policy.
b. Twisting is a specific form of misrepresentation.
c. Misrepresentation is a specific form of twisting.
d. Switching is a facility allowing policyholder to switch to another variable life funds
offered by the company.
c. Misrepresentation is a specific form of twisting.
Which of the following statements about the differences between variable life policies and
endowment policies are FALSE?
I. The policy values of variable life and endowment policies directly reflect the
performance of the fund of the life company.
II. The premiums and benefits of the endowment policies are described at inception of the
policy whereas variable life policies are flexible as they are account-driven.
III. The benefits and risks variable life and endowment policies directly accrue to the
policyholders.
a. I and II
b. I, II, and III
c. I and III
d. II and III
c. I and III
Which of the following statements about variable life policies are TRUE?
I. Offer price is used to determine the numbers of units to be cancelled to the account.
II. The margin between the bid and offer price is used to cover the management cost of the
policy.
III. The policy value is calculated based on the bid price of units allocated into the policy.
a. I, II, and III
b. I and II
c. I and III
d. II and III
d. II and III
Mr. Cruz is currently earning Ps 30,000 each month. He is 35 years old and has a reasonable
amount of savings. He has a moderate level for risk tolerance. What kind of policy would you
recommend him to buy?
a. Participating endowment
b. Variable life policies
c. Participating whole life
d. Annuities
b. Variable life policies
. Which of the following statements are FALSE?
I. The bid-offer spread is used to provide a death benefit for the Variable Life insurance
policy.
II. The bid price is always higher than the offer price.
III. The bid-offer spread is usually about 5%.
IV. There are two types of death benefits under the Variable Life insurance product. They
may offer either or both types depending on its product design and on the discretion of
the policyowner.
a. I and II
b. II and III
c. All of the above
d. None of the above
a. I and II
Which of the following statements about twisting is FALSE?
a. Twisting is a special form of misrepresentation.
b. It refers to an agent inducing a policyholder to discontinue a policy with another
company without disclosing the disadvantage of doing so.
c. It includes misleading or incomplete comparison of policies.
d. It refers to an agent offering a prospect a special inducement to purchase a policy.
d. It refers to an agent offering a prospect a special inducement to purchase a policy.
