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MOCK TEST (VUL) > MOCKTEST (VUL) > Flashcards

MOCKTEST (VUL) Flashcards

1
Q

Variable life insurance policy owners may make withdrawals in terms of

a.Number of units or fixed monetary amount through cancellation of units

b. Number of units or f ixed monetary amount through 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

a.Number of units or fixed monetary amount through cancellation of units

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2
Q

Which one of the following statements about the flexibility features of variable life policies is FALSE?

a. Policy holders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at bid price

b. Policy holders can take loans against their variable life policies up to the entire withdrawal value of their policies.

c. Policy holders have the flexibility of switching from one fund to another provided it satisfies the company’s switching criteria.

d. Policy holders have the flexibility of increasing or decreasing their premiums for regular premiums variable life policies.

A

b. Policy holders can take loans against their variable life policies up to the entire withdrawal value of their policies.

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3
Q

The investment returns under variable life insurance policy
I. Are not guaranteed
II. Are assured
III. Are linked to the performance of the investment fund management by the life company I
IV. Fluctuate according to the rise and fall of market prices

a. I, II and III
b. I, II and IV
c.I, III and IV
d.II, III and IV

A

c.I, III and IV

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4
Q

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 value 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. I and II
b. I, II and III
C. I and III
d. II and III

A

d. II and III

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5
Q

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 policy holders to switch to another variable life funds offeredby company.

A

c. Misrepresentation is a specific form of twisting.

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6
Q

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

A

d. II and III

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7
Q

What is the most suitable investment instrument for an investor who is interested in protecting his principal and receiving a steady stream of income?

a. Equities
b. Warrants
C. Variable life policies
d. Fixed income securities

A

d. Fixed income securities

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8
Q

What are the disadvantages of 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, II
b. I, III
C.II, III
d.I, II and III

A

C.II, III

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9
Q

Which of the following statements about the differences between variable life insurance policies and endowment policies are FALSE?

I. The policy values of variable life and endowment policies directly affect the performance of the fund of the life insurance 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 policy holders

a. I and II
b. I, II and III
c.I and III
d. II and III

A

c.I and III

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10
Q

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 policy holder to discontinue 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

A

d. It refers to an agent offering a prospect a special inducement to purchase a policy

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11
Q

Mr. Juan Dela Cruz is currently earning P30,000/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 for him to buy?

a. Participating endowment
b. Variable life policies
c. Participating whole life
d. Annuities

A

b. Variable life policies

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12
Q

What are the benefits available when investing in variable life funds?

I.The variable life funds offer policy holders an access to a pooled or diversified portfolio

II. The variable life policy holder can vary his premium payments, take premium holidays, add single premium top-ups and change the level of the sum assured easily.

III. The variable life policy holder can have access to a pool of qualified and trained professional fund managers.

a. I and II
b.I and III
C.I, II and III
d. II and III

A

C.I, II and III

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13
Q

Rank the following in terms of their liquidity, from the least liquid to the most liquid:

I.Short term securities
II. Property
III. Cash
IV. Equities

a. IV, II, III, I
b. III, I, IV, II
C.I, I, IV, III
d. II, IV, I, III

A

C.I, I, IV, III

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14
Q

A unit trust is

a. Established by a trust deed which enables trustees 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 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

a. Established by a trust deed which enables trustees to hold the pool of money and assets in trust on behalf of the investor

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15
Q

Under variable life insurance policies

I.There is no guaranteed minimum sum assured for the purpose of declaring dividends

II. There is no guaranteed minimum sum assured as a level of life insurance protection

III. Each of the policy owner’s premiums will be used to purchase units the number of which is dependent on the selling price of each unit.

IV. Purchase of units can only be made from the variable life fund itself, which will then create new units and add the investment monies to the value of the fund.

a. I and IV
b. II and IV
c. III and IV
d. II and III

A

C.III and IV

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16
Q

The benefits of investing in variable funds include

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

A

c. I, II and III

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17
Q

Which of the following BEST describes the policy benefits of variable life policies?

A .The policy benefits are payable only on death or disability.

b. The policy benefits will depend on the long-term performance of the life company.

C. The policy benefits are directly linked to the investment performance of the underlying assets.

d. The policy benefits are guaranteed.

A

C. The policy benefits are directly linked to the investment performance of the underlying assets.

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18
Q

Why is it important that the customer must understand the sales proposal in full?

a.Because the insurer does not guarantee any return.

b. Because the impact of changes in investment or condition on variable life policy borne solely by the customer.

c, Because the agent may give the wrong recommendations.

d. Because the policy holders expect higher returns.

A

b. Because the impact of changes in investment or condition on variable life policy borne solely by the customer.

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19
Q

Which of the following statements about rebating are TRUE?

I. Rebating is prohibited under the Insurance Code.

II. Rebating deals with offering the prospect a special inducement to purchase a policy.

II. 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

A

a. I and II

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20
Q

Which one of the following statements is FALSE?

a. Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company
.
b. Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policy holders as cash dividends.

C. Both whole life and endowment policies can be used as investment mediums 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

a. Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company
.

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21
Q

Which of the following statements about option to top-up under variable life insurance products is FALSE?

a. Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies.

b. 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.

C. To top-up a policy, the policy owner pays further single premium at the time of top-up.

d. Policy owners are normally allowed to top-up their policies at any time, subject to a minimum amount.

A

a. Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies.

22
Q

The characteristics of a variable life insurance policy include

I. Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets.

II. Its protection cost is generally met by implicit charges.

III. Its commission and company expenses are met by a variety of implicit charges with normally 6 months’ notice given by the life companies prior to any change.

IV. Its withdrawal value is normally the value of units allocated to the policy owner calculated at the bid price.

a. I, II and III
b. II, III and IV
C. I, II and IV
d. I, III and IV

A

C. I, II and IV

23
Q

Which of the following statements about single premium variable life policies 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-ups single premium injections are allowed in these plans.
III. Policy holders have the flexibility of varying the level cover.

a. I, II and III
b.ll and III
c.I and II
d. I and III

A

b.ll and III

24
Q

Investing in bonds offer the following advantages EXCEPT

a. It offers protection to the principal and guaranteed steady flow of income.

b. It is a place of temporary refuge when the investor foresees that the market outlook is uncertain.

C. It allows the investor a chance for capital preservation.

d. It enables the investors an opportunity for capital appreciation.

A

d. It enables the investors an opportunity for capital appreciation.

25
Q

Which of the following statements about variable life policies are TRUE?

I.The withdrawal value is not guaranteed.

II. The volatility of the returns depends on the investment strategy of the fund.

III. The variable life policy holder has direct control over the investment decisions of the variable life fund

a. I, II, and III
b. Land II
c.I and III
d. II and III

A

b. Land II

26
Q

Single premium variable life insurance policy:

a. Must be issued with a minimum death benefit

b.Must be issued with a maximum withdrawal value

C.Has no death benefit

d. Has no withdrawal value

A

a. Must be issued with a minimum death benefit

27
Q

Which of the following statements about characteristics of variable life policies are TRUE?

I. Variable life policies generally have a 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. Land II
C.II and III
d. I and III

A

b. Land II

28
Q

Which of the following statements about benefits in variable life fund is FALSE?

a.The fund provides a highly diversified portfolio, thus lowering the risk of investment

b. The fund ensures definite high yield for investors since it is managed by professionals who

C. The fund relieves the investor from the hassle of administering his/her investment
are well-versed in the management of risks of investment portfolios

d. The fund enables small investors to participate in a pool of diversified portfolio in which he/she with low investment capital, is likely to have acceded to

A

b. The fund ensures definite high yield for investors since it is managed by professionals who

29
Q

The flexibility benefits of investing in variable life funds include

I. Policy owner 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 simple product design with a clear structure which caters 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.II and IV
d. I, III and IV

A

c.II and IV

30
Q

The fundamental differences between traditional participating life insurance policies and variable life insurance policies include

I.Variable life insurance policies are less likely to offer more choices in terms of the type of investment funds.

II. The investment elements of variable life insurance policies is made known to the policy owner at the outset and is invested in a separately identifiable fund which is made up of units of investment.

III. Variable life insurance policies offer the potential for higher returns.

IV. Traditional participating policies aim to produce a steady return by smoothing out market fluctuation.

a.I, III and IV
b. II, III and IV
C.I, II and III
d. I, II and IV

A

b. II, III and IV

31
Q

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 sales planning by the fund managers

d. For the purpose of financial planning by the policy owners

A

d. For the purpose of financial planning by the policy owners

32
Q

Which of the following statements about surrender value under traditional participating life insurance products is TRUE?

a. Cash value is paid when a yearly renewable term insurance policy is surrendered

b. When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with number of units.

C.The amount of surrender value is usually higher than the amount under non-participating policies and it varies with the age of the assured, being lower at older ages.

d. In the case of participating policies, the net cash surrender value includes the surrender value of the paid-up addition up to the date of surrender.

A

C.The amount of surrender value is usually higher than the amount under non-participating policies and it varies with the age of the assured, being lower at older ages.

33
Q

Which of the following statements about risk of investing in variable life funds is TRUE?

a. Policy owners who are risk averse should buy variable life insurance policies with high equity investment

b. Investment in variable life funds which are fully invested in units of equity bonds are not suitable for policy owners who can tolerate the risks of short-term fluctuation in their cash value

C.Policy owners who invest in variable life funds with high equity investment face greater risk but can expect to achieve higher return than traditional life insurance products over the long term

d. Policy owner who is risk averse should not purchase life insurance policies with high protection and guaranteed cash and maturity values

A

C.Policy owners who invest in variable life funds with high equity investment face greater risk but can expect to achieve higher return than traditional life insurance products over the long term

34
Q
  1. What would be the withdrawal value after a year?

(LOOK AT THE PICTURE)

Sum assured is 190% of single premium or the value of the units, whichever is higher.

ASSUMPTIONS:
1. Charges and fees are deducted after the single premium has been invested into the
account.
2. The growth rate of the unit price and 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

A

C. Ps.401,107.58

35
Q

The protection costs under a variable life insurance policy
I.Are met by flat initial charges for regular premium plans
II. Are generally covered by cancellation units in the fund
III. Are generally met by explicit charges stipulated openly in the policy terms
IV. Vary with age of policy owner and level of cover

a.I, II and III
b. I, II and IV
c.I, III and IV
d. II, III and IV

A

b. I, II and IV

36
Q

Which one of the following statements about diversification in portfolio management is FALSE?

a. A diversified portfolio provides greater security to an investor having to sacrifice the return for the portfolio.

b. Diversified can completely eliminate the risk of investing in stocks in a portfolio

C. Diversified can involve purchasing different types of stocks and investing in stocks of different countries

d. Diversified helps to spread the portfolio risk by investing in different categories of investment in a portfolio

A

b. Diversified can completely eliminate the risk of investing in stocks in a portfolio

37
Q

What are the advantages of investing in preferred shares?

I.It gives shareholders the right to a fixed dividend

II. Has the priority over company assets during dissolution

III. They enjoy benefit of capital appreciation

a. I, II and III
b. I and II
c. I and III
d. II and III

A

a. I, II and III

38
Q

With 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 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, II and III
b. I, II and IV
c. I, III and IV
d. II, III and IV

A

d. II, III and IV

39
Q

The objective of satisfying customers’ needs profitably can be achieved by an agent through

I. The giving of freebies to the customers

II. Extensive investment training by the company

III. The use of sales plan, where sales goals, strategies and objectives are coordinated with market analysis, segmentation and targeting

IV. The giving of monetary assistance and discount to the customers

a. I and III
b.II and III
C.I, II and IV
d. I, II and IV

A

b.II and III

40
Q
  1. 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

A

b. Amount invested in cash depends on the size of the cash flow requirement

41
Q
  1. Under a regular premium variable whole life insurance plan

I.Premium top-ups and holidays, subject to the life company’s administrative rules are usually allowed

II. Life protection is the main objective of the plan with investment as a nominal purpose

III. Withdrawals after the payment of a few years premium are usually allowed

IV. A single premium contribution is made to the policy which uses the premium to purchase units in variable life fund and to provide certain level of life cover

a. II, III and IV
b. I, II and IV
C.I, III and IV
d. II and III

A

d. II and III

42
Q
  1. Which of the following statements about investment objectives is FALSE?

a. People invest money in fixed deposits to produce high and quaranteed returns

b. People invest money to enhance a comfortable standard of living

c. People invest money to provide funds for higher education for their children

d. Investment in commodities has no regular income

A

b. People invest money to enhance a comfortable standard of living

43
Q

Which of the following is/are the main characteristic/s 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.Il
b. I
C.I, II and III
d. I and II

A

d. I and II

44
Q

Risk can be classified into two particular categories in relation to investment. They include

I.The risk of not losing some or all of a person’s initial investment

II. The risk of rate of return on the investment not matching up to the individual’s expectation

III. The risk of rate of return on the investment matching the individual’s expectation

IV. The risk of losing some or all of a person’s initial investment

a.I and III
b.I and II
C.III and IV
d. II and IV

A

d. II and IV

45
Q

The duties of the trustees of unit 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 adheres to the provision of the trust’s 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

a.Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself

46
Q

Policy fee payable by variable life insurance policy owner is to cover

a. The handling charges by professional investment managers

b. The price 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

A

d. The administrative expenses of setting up the variable life insurance policy

47
Q

The selling price under a variable life insurance policy is:

a. The price at which units the policy are bought back by the life company

b. The price at which units under the policy are offered for the sale by the life company

C.Also known as the bid price

d. A fixed amount throughout

A

b. The price at which units under the policy are offered for the sale by the life company

48
Q
  1. In risk-return profile of cash funds, bond funds, balanced funds, managed 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

A

b. II, III and IV

49
Q

Diversification in investment involves

a. Putting all the funds under management into one category of investment

b. Spreading the risks of investment by not putting the fund into several categories of investment

C. Reducing the risks of investment by putting one fund under management into several categories of investment

d. Reducing the risks of investment by putting all one’s eggs in one basket

A

C. Reducing the risks of investment by putting one fund under management into several categories of investment

50
Q
  1. Variable life funds can be invested in any financial instruments including cash funds, bond funds, equity funds, property funds, specialized funds and diversified 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 shares of stocks which are inherently of lower risk in nature and the prices of stocks are stable

d. Invest in shares of stocks and investors who usually buy such assets usually aim for capital appreciation

A

d. Invest in shares of stocks and investors who usually buy such assets usually aim for capital appreciation

MOCK TEST (VUL) (1 decks)

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