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VUL Flashcards

1
Q

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

a. To top-up a policy, the policyowner 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

A

b. Policyowner may buy additional units in the variable life fund and these units will be allocated to new variable life insurance policies.

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2
Q

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

A

c. II, and III

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3
Q

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.

A

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

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4
Q

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

A

d. Fixed Income Securities

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5
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 financial planning by the policy owners

d. For the purpose of sales planning by fund managers

A

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

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6
Q

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

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.

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7
Q

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

a. I, II and IV

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8
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 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

a. II and III

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9
Q

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

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

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10
Q

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

a. I, II, III, and IV

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11
Q

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

A

d. Ordinary Shares

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12
Q

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

a. I, II, and III

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13
Q

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

A

b. II, III, and IV

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14
Q

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

a. Bid-offer spread

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15
Q

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

A

d. Guaranteed interest rate

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16
Q

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

A

b. I and II

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17
Q

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

A

d. All of the above

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18
Q

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

A

c. I, II, and III

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19
Q

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

a. I and II

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20
Q

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

A

c. I, III, and V

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21
Q

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

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

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22
Q

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

A

b. II and III

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23
Q

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

A

c. I, III, and V

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24
Q

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

A

b. I and II

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25
Q

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

A

b. I and II

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26
Q

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

A

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

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27
Q

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

A

c. I, II, and IV

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28
Q

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.

A

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.

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29
Q

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:

  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 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

A

c. Ps. 401,107.58

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30
Q

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.

A

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

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31
Q

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

A

d. II, III, and IV

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32
Q

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.

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33
Q

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

A

d. I and II

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34
Q

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

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

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35
Q

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

A

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

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36
Q

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

A

b. II, III, and IV

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37
Q

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.

A

d. Invest in share of stocks and investor who buys such assets usually aims for capital appreciation

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38
Q

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

A

c. I, III, and IV

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39
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 policyholder to switch to another variable life funds offered by the company.

A

c. Misrepresentation is a specific form of twisting.

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40
Q

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

A

c. I and III

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41
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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42
Q

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

A

b. Variable life policies

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43
Q

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 policy owner.

a. I and II
b. II and III
c. All of the above
d. None of the above

A

a. I and II

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44
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 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.

A

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

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45
Q

If the current offer price is Php 2.50, and the bid-offer spread is 4%, what is the bid price?

a. Php 2.40
b. Php 2.50
c. Php 2.60
d. Php 3.70

A

a. Php 2.40

46
Q

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

I. Short Term Securities
II. Property
III. Cash
IV. Equities

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

A

c. II, I, IV, III

47
Q

Which of the following best describes the 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.

48
Q

Investing in bonds offers the following advantages EXCEPT :

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

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

c. It enables the investor an opportunity for capital appreciation.

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

A

c. It enables the investor an opportunity for capital appreciation.

49
Q

Which of the following statements about benefits in a 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 the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios.

c. The fund relieves investor from the hassle of administering his/her investment.

d. The fund enable small investor 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 the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios.

50
Q

The differences between traditional participating life insurance and variable life insurance 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 are made known to the policy owner at the outset and is invested in a separately identifiable fund which is made up 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

51
Q

Advantages of investing in preferred shares are:

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

52
Q

Under 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, III, and IV
c. I, II, and IV
d. I, II, and III

A

d. I, II, and III

53
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 up to 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

54
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 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 sale by the life company.

55
Q

Which statement regarding the risk of investment in Variable Life is TRUE:

a. Policyowners who are risk averse should not purchase a life insurance policy with high protection and guaranteed cash and maturity values.

b. Investments in Variable Life funds which are fully invested in units of equity funds are not suitable for policyowners who can tolerate the risks of short-term fluctuation in their cash values.

c. Policyowners who invest in Variable Life funds with high equity investment face greater risk but can expect to achieve higher return that Traditional Life insurance policies with high equity investment.

d. Policyowners who are risk averse should buy Variable Life policies with high equity investment.

A

c. Policyowners who invest in Variable Life funds with high equity investment face greater risk but can expect to achieve higher return that Traditional Life insurance policies with high equity investment.

56
Q

Which of the following statements describes the difference between Variable Life insurance products and Traditional Participating products?

I. Variable Life insurance products allow policyowners to change the premium payments, but Traditional Participating Life products do not.

II. Variable Life insurance products can take the form of Whole Life or Endowment policies, but Traditional Life policies cannot.

III. Variable Life insurance products allow the policyowners to pay future single premiums from time to time to add more units to his account, but Traditional Life Participating products do not.

a. I
b. I and III
c. II and III
d. All of the above

A

b. I and III

57
Q

What are the disadvantages of investing in cash and deposits?

I. There is reinvestment risk.
II. They provide the lowest return.
III. It is the safest type of investment.

a. I
b. I and II
c. II and III
d. All of the above

A

b. I and II

58
Q

When investing in variable life funds, what are the benefits available?

I. The variable life funds offer policyholders an access to pooled or diversified portfolios.

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

III. The variable life policyholder can have access to the services of 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

59
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 policyowner’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 the investment will add value to the fund.

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

A

d. III and IV

60
Q

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

a. Because the insurer does not guarantee any return.

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

c. Because the agent may give the wrong recommendations.

d. Because the policyholders expects higher returns.

A

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

60
Q

A single premium variable life insurance policy ____.

a. Has no withdrawal value
b. Must be issued with a maximum withdrawal value.
c. Has no death benefit
d. Must be issued with a minimum death benefit.

A

d. Must be issued with a minimum death benefit.

61
Q

Under a variable life insurance policy, the protection costs ____.

I. Are met by a flat initial charges for regular premium loans

II. Are generally covered by cancellation of 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 coverage.

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

61
Q

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

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

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

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. Policyholders who are risk averse should purchase life insurance policies with high protection and guaranteed cash and maturity values.

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.

61
Q

Term insurance ____.

a. Provides for payment of the sum insured when the life insured survives a specific period.

b. Provides protection for a specific period and has no savings element.

c. Is the most complex and expensive of all life insurance products.

d. Provides for surrender of cash values on early termination of the insurance

A

b. Provides protection for a specific period and has no savings element.

62
Q

The objective of satisfying customers’ need and business profitability can be achieved by an agent through ______

I. The giving of freebies to customers.

II. Extensive investment training by the company.

III. The use of sales plan, where sales goals, strategic 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. II, III, and IV

A

b. II and III

63
Q

These statements are true EXCEPT:

a. No regular income may be gained from investing in commodities.

b. People invest money to provide funds for the higher education of their children.

c. Investing in fixed deposits gives high guaranteed returns.

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

A

c. Investing in fixed deposits gives high guaranteed returns.

64
Q

Which of the following statements about investment objectives is FALSE?

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

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

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

d. Investment in commodities has no regular income.

A

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

65
Q

Which of the following funds is comprised of a higher proportion of equity and a lower proportion of fixed-income instruments?

a. Bond Funds
b. Managed Funds
c. Cash Funds
d. Mixed Funds

A

b. Managed Funds

66
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 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.

67
Q

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

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

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

c. A diversified portfolio provides greater security to an investor without sacrificing the returns of the portfolio.

d. Diversification can involve purchasing different types of stocks and investing in stocks of different countries.

A

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

68
Q

People generally invest their money to provide:

I. An improvement in their financial position

II. A less comfortable standard of living

III. Retirement income

IV. Funds for paying necessary expenses and taxes when the person dies.

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

A

b. I, III, and IV

69
Q

Which of the following are the main characteristics of Variable Life Insurance policies?

I. The policies can be used for investments, as a source of regular savings and protection.

II. The withdrawal and protection benefit are determined by the investment performance of the underlying assets.

III. The net withdrawal values of the policies are the gross withdrawal values shown in the policy which includes cash dividends up to the date of surrender, less all indebtedness and includes interests.

a. I
b. III
c. I and II
d. All of the above

A

c. I and II

70
Q

Which of the following statements are FALSE?

I. The policyowners may request a partial withdrawal of the policy and the amount will be bet by cashing the units at the offer price.

II. Some Variable Life policies grant loans to polcyowners which is limited to a percentage of the cash value.

III. The structure of charges and the investment content of a Variable Life policy are specified in the policy document and the policy statement.

IV. Commissions and office expenses are met by a variety of implicit charges, some of which are variable.

a. I and II
b. I and III
c. II and III
d. All of the above

A

a. I and II

71
Q

Which of the following statements about the feature of Regular Premium Variable Life Policy are TRUE?

I. Top-ups are usually allowed.
II. Premium holidays are usually allowed.
III. The level of coverage can be varied.

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

A

d. I, II, and III

72
Q

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

A

d. I, II, and III

73
Q

Which one of the following statements is NOT TRUE about the benefits of investing in a Variable Life insurance policy?

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

b. The fund ensures definite high yield for the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios.

c. The fund relieves investor from the hassle of administering his/her investment.

d. The fund enables small investor 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 the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios.

74
Q

Which of the following are some of the features of Variable Life insurance policies?

I. Guaranteed withdrawal values
II. Variation in sum assured
III. Partial Withdrawal

a. II
b. III
c. II and III
d. All of the above

A

c. II and III

75
Q

The benefits of investing in Variable Life fund include:

I. Policyowners have access to pooled and diversified portfolio of investment.

II. The policyowner can easily change the level of premium payments as the product design of Variable Life insurance policies have clear structures which cater separately for investment and insurance protection.

III. Policyowners can gain access to Variable Life funds managed by professional investment managers.

IV. The policyowner is relieved of the day-today administration of his investment.

a. I, II, and III
b. I, II, and IV
c. I, III, and IV
d. All of the above

A

d. All of the above

76
Q

Which of the following statements describes the difference between Variable Life products and Traditional Participating Life products?

I. Variable Life products allow policyowners to pay top-up premiums from time to time to buy more units for his account, unlike Traditional Participating Life policies.

II. Variable Life products allow policyowners to take premium holiday, unlike Traditional Participating Life products.

III. Variable Life products can take the form of Whole Life and Endowment policies, unlike Traditional Participating Life products.

a. I only
b. I and II
c. III only
d. All of the above

A

b. I and II

77
Q

Your client is a 35-year-old male, earning Php35,000 a month, has savings, and with a moderate risk tolerance. What product will you recommend?

a. Variable Life
b. Participating Whole Life
c. Term
d. Endowment

A

a. Variable Life

78
Q

In a Unit Trust Investment, the duties of a Trustee include all of these EXCEPT:

a. Selects and manages the investments of the Trust.

b. Holds the pool of money and assets in trust on behalf of the investors.

c. Protects the interests of the unit holders.

d. Ensures that the fund managers adhere to the provisions of the trust deed

A

a. Selects and manages the investments of the Trust.

79
Q

To the policyowners, administration benefits under Variable Life include:

a. Engaging independent professional fund managers personally to manage the complicated transaction.

b. Constructing their own diversified portfolio.

c. Exercising investment expertise by selecting funds that will give higher returns.

d. Keeping track of their investment through the statements provided regularly by the insurance company.

A

d. Keeping track of their investment through the statements provided regularly by the insurance company.

80
Q

Which statement best describe Variable Life?

a. Fixed premium with returns that will vary.
b. Fixed premium with returns that will vary.
c. Flexible premium with returns that will not vary.
d. Flexible premium with returns that will not vary.

A

d. Flexible premium with returns that will not vary.

81
Q

Variable Life policies, the definition of selling price is:

a. The price at which units under the policy is offered for sale by the life company.

b. It is also known as the bid price.

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

d. It is a fixed amount throughout the life of the policy.

A

a. The price at which units under the policy is offered for sale by the life company.

82
Q

The statements below are true about the top-up option of a Variable Life insurance product EXCEPT:

a. Policyowners may buy additional units of Variable Life fund and these units will be allocated to new Variable Life insurance policies.

b. Policyowners are allowed to make top-up on their policies at any time, subject to a minimum amount.

c. The policyowner pays further single premium to make a top-up.

d. Further premiums at the time of top-up will be used in full after deducting charges to purchase additional units of the Variable Life funds.

A

a. Policyowners may buy additional units of Variable Life fund and these units will be allocated to new Variable Life insurance policies.

83
Q

Which is NOT a characteristic of a Variable Life policy?

a. It is used solely for investment purposes.

b. The commission and office expenses are met by explicit charges.

c. It has generally, though not necessarily, more exposure to equity investments.

d. Its cash value is usually the value of the units allocated to the policy calculated at the prevailing bid price.

A

d. Its cash value is usually the value of the units allocated to the policy calculated at the prevailing bid price.

84
Q

Which of the following statements about investment returns under a Variable Life insurance policy is NOT TRUE?

a. It is assured.

b. It fluctuates based on the rise and fall of market prices.

c. It is not guaranteed.

d. It is linked to the performance of the investment fund managed by the life company.

A

a. It is assured.

85
Q

Which statements are FALSE regarding the difference between Endowment policies and Variable Life policies?

I. The benefits and risk of Endowment and Variable Life policies directly accrue to the policyowners.

II. The premiums and benefits of the Endowment policies are stated at it inception while those of Variable Life policies are flexible as they are account driven.

III. Their policy values directly reflect the performance of the fund of the life company.

a. I and II
b. I and III
c. II and III
d. All of the above

A

b. I and III

86
Q

What are the advantages in investing in preferred shares?

I. It has priority on company assets during dissolution.

II. It has a benefit of capital appreciation.

III. The shareholder has the right to a fixed dividend.

a. I and II
b. I and III
c. II and III
d. All of the above

A

d. All of the above

87
Q

Which of the following information is NOT required to be disclosed to policyowners to Variable Life policies?

a. The premiums received and charges levied during the period.

b. The number and value of units held at the beginning of the period, bought, and sold during the period, and held at the end of the period.

c. The net withdrawal as of the statement date.

d. The basis and frequency of valuing the assets.

A

d. The basis and frequency of valuing the assets.

88
Q

All of these are mandatory provisions in Variable Life policy contract EXCEPT:

a. Incontestability Provisions

b. The entire Insurance Contract Provision

c. Misstatement of Age or Sex Provision

d. None of the above

A

d. None of the above

89
Q

What is the “Net Amount at Risk”?

a. The minimum death benefit

b. The excess between the minimum death benefit and the value of the policy owner’s separate variable account.

c. The sum insured

d. The difference between the minimum death benefit and the sum assured

A

b. The excess between the minimum death benefit and the value of the policy owner’s separate variable account.

90
Q

If a policyowner fails to pay the premium on time and there are no withdrawal values in the account, the policy will:

a. Continue in full force for a specific period of grace

b. Continue at a reduced sum assured

c. Terminate immediately on the day premium is due.

d. Continue at the same sum assured for the same basic benefits

A

c. Terminate immediately on the day premium is due.

91
Q

If a policyowner returns the Variable Life insurance contract within the cooling off period, he will receive:

a. Nothing
b. All premiums paid
c. A refund equal to the market value of the units only
d. A refund equal to the market value of the units plus initial charges

A

d. A refund equal to the market value of the units plus initial charges

92
Q

The benefits of investing in variable life funds include _____:

I. Policy owners can gain access to variable life finds managed by professional investment managers with proven track record.

II. Policy owners have access to pooled or diversified portfolios of investment.

III. 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.

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

93
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 policyowners 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

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

94
Q

Offer Price = Php 16.00
Bid-Offer Spread = 4.5%
Units = 25,000
Policy Fee = Php 1,800.00
Admin and Mortality Charges = Php 8,750.00
Top-up Fee = Php 700.00
Admin Top-up =2,000.00

Presuming all charges are deducted by canceling units and that the bid price increase by 8%, what is the withdrawal value after a year?

a. 432,000.00
b. 420,069.02
c. 401,107.58
d. 412,500.00

A

c. 401,107.58

95
Q

Which of the following about rebating is FALSE?

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

d. III

96
Q

Which of the following statements about twisting are TRUE?

I. Twisting is a special form of misrepresentation.

II. It refers to an agent including a policyholder to discontinue a policy with another company without disclosing the disadvantages of doing so.

III. It includes misleading or incomplete comparison of policies.

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

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

A

a. I, II, and III

97
Q

Which of following statements about option to top-up under variable insurance products are TRUE?

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

II. 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.

III. To top-up a policy, the policyowner pays further single premium at the time of top-up.
IV. Policyowners are normally allowed to top-up their policies at any time, subject to a minimum amount.

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

A

d. II, III, and IV

98
Q

Which of the following statements is/are FALSE?

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

A

a. I

99
Q

Investment diversification involves ___.

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

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

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

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

A

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

100
Q

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

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

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

c. 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.

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

A

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

101
Q

A single premium variable life insurance policy must be issued with ____.

a. Without death benefit
b. Without withdrawal value
c. A minimum death benefit
d. A maximum withdrawal value

A

c. A minimum death benefit

102
Q

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 costs are generally met by the explicit 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. I, III, and IV
c. I, II, and IV
d. II, III, and IV

A

c. I, II, and IV

103
Q

Which of the following duties of the trustees are FALSE?

a. Ensuring that the fund manager adhere to the provision of trusts deeds

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

c. Holding the pool of money and assets in trust in behalf of the investors.

d. Acting generally to protect the unit-holders

A

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

104
Q

Investing in bonds offer the following advantages with the exception of ___.

a. Offering protection to the principal and guaranteed steady stream of income.

b. Allowing the investor a chance for capital preservation.

c. Enabling the investors an opportunity for capital appreciation.

d. Being a place of temporary refuge when the investor foresees that the market outlook is uncertain

A

c. Enabling the investors an opportunity for capital appreciation.

105
Q

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

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

b. Investment in variable life fund, which are fully invested in units of equity bonds, are not suitable for policyowners who can tolerate the risks of short-term fluctuations in their cash value.

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

d. Policyowner who are risk averse should not purchase life insurance policies with high protection and guaranteed cash and maturity values.

A

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

106
Q

Which of the following statements about twisting is FALSE?

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

b. It refers to an agent inducing a policyholder to discontinue policy with another company without disclosing the disadvantage of doing so.

c. It includes misleading or incomplete comparison of policies.
d. Twisting is special form of misrepresentation.

A

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

107
Q

Which of the following statements about investment objectives is FALSE?

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

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

c. Investment in commodities has no regular income.

d. People invest money in equities to produce high and guaranteed income

A

d. People invest money in equities to produce high and guaranteed income

IC Exam (2 decks)

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