Variable Flashcards
Variable life insurance policy owners may make withdrawals in terms of
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Number of units or fixed monetary amount through the cancellation of units
Number of units through the cancellation of units
Fixed monetary amount only through the reduction of the life cover sum assured
Number of units of fixed monetary through reduction of the life cover sum assured
Number of units through the cancellation of units
Which of the following statements about the flexibility features of variable life policies is false?
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Policyholders have the flexibility of increasing or decreasing their premiums for regular premium variable life policies
Policyholders can take loans against their variable life up to the entire withdrawal value of their policies
Policyholders have the flexibility of switching from one fund to another provided it satisfies the company’s switching criteria
Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at the bid price
Policyholders can take loans against their variable life up to the entire withdrawal value of their policies
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 managed by the life insurance company
IV. Fluctuate according to the rise and fall of market prices
I, III and IV
Which of the following statements is 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 the time of the surrender
III. The life company needs to maintain a separate account for variable life policies
distinct from the general account
II & III
Which of the following statements is FALSE?
*Rebating is to offer a prospect a special inducement to purchase a policy
*Twisting is a specific form of misrepresentation
*Switching is a facility allowing the policyholders to switch to another variable life funds offered by the company
*Misrepresentation is a specific form of twisting
Misrepresentation is a specific form of twisting
Which of the following statements about variable life policies is TRUE?
I. Offer price is used to determine the number of units to be credited to the account
II. The margin between the bid and offer price is used to cover the managements
cost of the policy
III. The policy value is calculated based on the bid price of units allocated into the
policy
II & III
What is the most suitable investment instrument for an investor who is interested in
protecting his principal and receiving a steady stream of income?
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Equities
Fixed income securities
Warrants
Variable life policies
Fixed income securities
What are the disadvantages of investing in common shares?
I. Dividends are paid more than fixed rates
II. Investors are exposed to market and specific risks
III. Shares can become worthless if company becomes insolvent
II & III
Which of the following statements about the difference between variable life
policies and endowment policies
I. The policy values of variable life policies directly reflect the performance of the fund of
the life company
II. The premiums and benefits of the endowment policies are described at the
inception of the policy whereas variable life are flexible as they are account
driven
III. The benefits and risks of variable life and endowment policies directly
accrue to the policyholders
II & III
Which of the following statements about twisting is FALSE?
*Twisting is a special form of misrepresentation
*It refers to an agent offering a prospect a special inducement to purchase a policy
*It includes misleading or incomplete comparison of policies
*It refers to an agents including a policyholder to discontinue policy with another company without disclosing the disadvantage of doing so
It refers to an agent offering a prospect a special inducement to purchase a policy
Mr. Juan dela Cruz is currently earning Php 30,000.00 per month. He is 35 years old and he
has a reasonable amount of savings. He has a moderate level of risk tolerance. What kind
of policy would you recommend for him to buy?
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Participating Endowment
Participating whole life
Annuities
Variable life policies
Participating whole life
What are the benefits available when investing in variable life funds? *
I. The variable life funds offer policyholders an access to pooled or diversified portfolios
II. The variable life policyholders 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 policyholder can have access to a pool of qualified and trained
professional fund
I, II & III
A unit trust is:
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Established by a trust deed which enables a trustee to hold the pool of money and assets in trust in behalf of the investor
An organization registered under the SECURITY EXCHANGE COMMISSION (SEC) which usually invests in a wide range of equities and other investment
One whereby the investor buys units in the trust itself and not share in the company
A close-end fund and does not have to dispose of if the large number investors sell their shares
Established by a trust deed which enables a trustee to hold the pool of money and assets in trust in behalf of the investor
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 premium 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 investment monies to the value of the fund
III & IV
The benefits of investing in variable life 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 policies have clear structures which cater separately for investment and
III. Insurance protection IV. 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
I, II & III
Which of the following BEST describes the policy benefits of variable life policies?
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The policy benefits will depend on the long —term performance of the life company.
The policy benefits are payable only on death or disability
The policy benefits are directly linked to the investment performance of the underlying assets
The policy benefits are guaranteed
The policy benefits are directly linked to the investment performance of the underlying assets
Why is it important that the customer must understand the sales proposal in full?
Because the impact of changes in investment conditions on variable life policy is borne solely by the customer
Because the policyholder expects higher returns
Because the insurer does not guarantee any return
Because the agent may give the wrong recommendations*
Because the impact of changes in investment conditions on variable life policy is borne solely by the customer
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 III. Rebating will enhance the sales performance and uphold the
prestige of an agent
I & II
Which one of the following statements is FALSE?
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Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholder as cash dividends
The investment element of Variable life policies varies according to underlying assets of the portfolio
Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company
Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date*
Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company
Which of the following statements about option top —up under variable life insurance is false?
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Further premiums at time of the top —up will be used in full, after deducting charges for top — ups, to purchase additional units of the variable life funds
Policy owners are normally allowed to top —up their policies at any time, subject to a minimum amount
Top —up policy, the policy owner pays further single premium at the time of the top —up
Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies
Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies
The characteristics of a variable life insurance include
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 commission and company expenses are met by a variety of explicit 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
I, III & IV
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 or single premium injections are allowed in these plans
III. Policyholders have the flexibility of varying the level cover
I & II
Investing in bonds offer the following EXCEPT:
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Must be issued with a maximum withdrawal value
Must be issued with a minimum death benefit
It enables the investor an opportunity for capital appreciation
It allows the investor a chance for capital preservation
It enables the investor an opportunity for capital appreciation
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 policyholder has direct control over the investment decisions of the
variable life fund
I & II
Single premium variable life insurance policy:
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Must be issued with a maximum withdrawal value
Has no withdrawal value
Has no death benefit
Must be issued with a minimum death benefit
Must be issued with a minimum death benefit
Which of the following statements about characteristics of variable life policies are TRUE?
I. Variable policies generally have a longer 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. The commissions and company expenses are met by a variety of explicit charges,
some of which are variable
I & III
Which of the following statements about benefits in variable life fund is FALSE?
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The fund provides a highly diversified portfolio, thus, lowering the risk of investment
The fund enables small investors to participate in a pool of diversified portfolio in which he/she, with a low investment capital, is likely to have acceded to
The fund relieves the investor from the hassle of administering his /her investment
The fund ensures definite high yield for an investor since it is managed by professionals who are well-versed in the management of risk of investment portfolios
The fund ensures definite high yield for an investor since it is managed by professionals who are well-versed in the management of risk of investment portfolios
The flexibility benefit of investing in variable life funds include
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 policies offer the potential for higher returns
IV. Traditional participating policies aim to produce a steady return by smoothing out
market fluctuation
I, II & III
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
II, III, IV
The switching facility under variable life insurance policies is a very useful
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For the purpose of sales planning by the fund managers
For the purpose of assets planning by the trustee
For the purpose of profit planning by the life policies
For the purpose of financial planning by the policy owners
For the purpose of financial planning by the policy owners
