Variable Unit-Linked

Question 1

A life insurance policy that offers both insurance protection with benefits (or fund value) directly related to the performance of the investment funds chosen by the client.

Answer 1

Variable Unit-Linked

Question 2

The price which the insurer uses to allocate units to a policy when premiums are paid

Answer 2

Offer Price or Selling Price

Question 3

The price which the insurer will give for the units if the policyholder wishes to cash in or claim under the policy

Answer 3

Bid Price or Buying Price

Question 4

These are single premium injections which can be used to buy additional units

Answer 4

Top-ups

Question 5

This refers to the cessation of premium payments on a variable life insurance contract for a period, with a view to continue it later on

Answer 5

Premium Holiday

Question 6

This is a pricing structure wherein the buying and selling prices of units are determined at the next valuation date

Answer 6

Forward Pricing

Question 7

This is the periodic distribution of premiums to insurance and units

Answer 7

Allocation of Premiums

Question 8

This means that the contract may be returned within 15 days of receipt by the policyholder

Answer 8

15-day cooling-off period

Question 9

How many days given in a Grace Period?

Answer 9

31 Days

Question 10

A fee that covers the administrative expense

Answer 10

Policy Fee

Question 11

This covers mortality cost (dependent on age)

Answer 11

Mortality Charges

Question 12

This is a part of the premium being deposited for marketing & setting-up expenses of the policy

Answer 12

Unallocated Premiums

Question 13

This is deducted when the policy is fully withdrawn

Answer 13

Full Withdrawal Charges

Question 14

This is the difference between bid and offer prices

Answer 14

Bid-Offer Spread

Question 15

It is imposed on each investment fund (0.5% - 2% per annum) and is used to cover investment expenses

Answer 15

Fund Management Fee

Question 16

• Facility for transferring from one fund to another
• Limited number of switches are usually not charged
• Useful in retirement and education fees planning

Answer 16

Switching

Question 17

Charges that are imposed when there are changes in the fund allocation in the policy

Answer 17

Fund Allocation Charge

Question 18

1. Premiums, cash values and death benefits are pre-determined.
2. Policyholders do not have investment options
3. Implicit charges

Examples: Whole Life, Endowment and Term

Answer 18

Traditional Policies

Question 19

1. Cash Values/Fund Values are not pre-determined
2. Additional premiums may be allowed (on top of regular premiums)
3. Policyholders may have investment options
4. Explicit charges

Examples: Universal-Linked, Variable Life, and Variable Unit-Linked

Answer 19

Non-Traditional Policies

Question 20

1. Unbundled
2. Flexible Premiums, Death Benefit
3. Seen as savings account plus term insurance
4. Interest credited to account value, usually subject to minimum interest rate
5. Policy owner does not have a choice of the investment funds

Answer 20

Universal Life (UL)

Question 21

1. Fixed premium, minimum death benefit
2. Cash value depends on investment performance
3. Policy owner has a choice of investment funds

Answer 21

Variable Life

Question 22

1. Fixed premium, minimum death benefit
2. Cash value depends on investment performance
3. Policy owner has a choice of investment funds

Answer 22

Variable Life

Question 23

Is a life insurance policy that offers both insurance protection with benefits (or fund value) directly related to the performance of the investment funds chosen by the client.

Answer 23

Variable Unit-Linked or VUL

Question 24

VUL combines both the:

Answer 24

Premium & death flexibility of Universal Life (UL)

Investment Control of Variable Life (VL)

Question 25

Advantages of VUL are:

Answer 25

Diversification
Professional Management
Flexibility
Access
Administration
Changes are Transparent
Investment Risk (Risk/Reward Trade-off)
Gets the client involved