VUL 21-49

Question 1

21. 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 the 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;
    c. To top-up 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.

Answer 1

b. Further premiums at the 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;

Question 2

22. The characteristics of a variable life insurance include
    a. 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
    b. Its withdrawal value is normally the value units allocated to the policyowner calculated at the bid price
    c. its protection costs are generally met by implicit charges
    d. its withdrawal value and protection benefits are determined by the investment performance of the underlying assets

Answer 2

b. Its withdrawal value is normally the value units allocated to the policyowner calculated at the bid price
c. its protection costs are generally met by implicit charges
d. its withdrawal value and protection benefits are determined by the investment performance of the underlying assets

Question 3

23. Which of the following statements about single premium variable life policies are TRUE
    a. There is no fixed term in a single premium variable life policy and therefore, they are technically whole life insurance
    b. Top-ups or single premium injections are allowed in these plans
    c. Policyholders have the flexibility of varying the level cover

Answer 3

a. There is no fixed term in a single premium variable life policy and therefore, they are technically whole life insurance
b. Top-ups or single premium injections are allowed in these plans

Question 4

24. Investing in bonds offer the following EXCEPT
    a. It allows the investor a chance for the capital preservation
    b. It enables the investor an opportunity for the capital appreciation
    c. It is a place of temporary refuse when the investor foresees that the market outlook is uncertain
    d. It offers protection to the principal and guaranteed steady stream of income

Answer 4

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

Question 5

25. Which of the following statements about variable policies are TRUE?
    a. The volatility of the returns depends on the investment strategy of the fund
    b. The withdrawal value is not guaranteed
    c. The variable life policyholder has direct control over the investment decision of the variable life fund

Answer 5

a. The volatility of the returns depends on the investment strategy of the fund
b. The withdrawal value is not guaranteed
c. The variable life policyholder has direct control over the investment decision of the variable life fund

Question 6

26. Single premium variable life insurance policy

a. Has no death benefit
b. Has not withdrawal value
c. Must be issued with a minimum death benefit
d. Must be issued with a maximum withdrawal value

Answer 6

c. Must be issued with a minimum death benefit

Question 7

27. Which of the following statements about the characteristics of variable life policies are TRUE?
    a. Variable life policies generally have a larger exposure to equity investment than with participating and other traditional policies
    b. Commissions and company expenses are met by variety of explicit charges, some of which are variable
    c. The protection costs are generally met by implicit charges, which vary with age and level of cover

Answer 7

a. Variable life policies generally have a larger exposure to equity investment than with participating and other traditional policies
b. Commissions and company expenses are met by variety of explicit charges, some of which are variable

Question 8

28. Which of the following statements about benefits in variable fund is FALSE?
    a. The fund relieves investor from the hassle of administering his/her investment
    b. The fund provides a highly diversified portfolio, thus, lowering the risk of investment
    c. 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
    d. The fund ensures definite high yield for an investor since it is managed by professionals who are well-versed in the management of risks of investment portfolios.

Answer 8

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

Question 9

29. The flexibility benefit of investing variable life funds include
    a. Variable life insurance policies offer the potential higher returns
    b. Traditional participating policies aim to produce a steady by smoothing out market fluctuation
    c. Policy owners can easily take premium holidays and add single premium to to-ups
    d. Policyowners can easily change the level of sum assured and switch their investment between funds

Answer 9

a. Variable life insurance policies offer the potential higher returns
b. Traditional participating policies aim to produce a steady by smoothing out market fluctuation
d. Policyowners can easily change the level of sum assured and switch their investment between funds

Question 10

30. The fundamental differences between traditional participating life insurance policies and variable life insurance policies include
    a. Variable life insurance policies offer the potential for a higher returns
    b. Traditional participating policies aim to produce a steady return by smoothing our market fluctuation
    c. Variable life insurance policies are less like to offer more choices in terms of the type of investment funds
    d. The investment elements of variable life insurance policies is made know to the policyowner at the outset and is invested in separately identifiable fund which is made up units of investment

Answer 10

b. Traditional participating policies aim to produce a steady return by smoothing our market fluctuation
c. Variable life insurance policies are less like to offer more choices in terms of the type of investment funds
d. The investment elements of variable life insurance policies is made know to the policyowner at the outset and is invested in separately identifiable fund which is made up units of investment

Question 11

31. The switching facility under variable life insurance policies is very useful
    a. For the purpose of assets planning by the trustee
    b. For the purpose of sales planning by the fund managers
    c. For the purpose of financial planning by the policy owners
    d. For the purpose of profit planning by the life policies

Answer 11

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

Question 12

32. The following statement about the surrender value under traditional participating life insurance products are TRUE.
    a. When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with number of units
    b. The amount of surrendered value is usually higher than the amount under non-participating policies and it varies with the age of the insured, being lower at older ages
    c. Cash value is paid when yearly renewable term insurance policy is surrendered
    d. In the case of participating policies, the net cash surrender value includes the surrender value of the paid-up additional up to the date of surrender

Answer 12

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

Question 13

33. Which of the following statements about risks of investing in variable life funds is TRUE?
    a. 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
    b. Investment in variable life funds which are fully invested in units of equity bonds are not suitable for policyowners who can tolerate the risk of short term fluctuation in their cash value
    c. Policyowners who are risk averse should buy variable life insurance policies with high equity investment
    d. Policyowners who are risks averse should not purchase life insurance with high protection and guaranteed cash and maturity values

Answer 13

a. 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

Question 14

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

Offer Price: PHP 16.00
Bid-Offer spread: 4.5%
Number of units bought: 25,000
Policy Fee: 1,800
Admin and Mortality Charge: 8,750
Top-up Fee: 700
Admin for Top-up: 2,000
Sum assured is 190% of single premium or the value of the units, whichever is higher

ASSUMPTIONS:
1. Charges and fee 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
(1 Point)

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

Answer 14

c. PHP 401,107.58

Question 15

35. The protection cost under a variable life insurance policy
    a. Vary with age of policyowner and level of cover
    b. Are met by a flat initial changes for regular premium plans
    c. Are generally covered by cancellation of units in the fund
    d. Are generally met by explicit charges stipulated openly in the policy terms

Answer 15

a. Vary with age of policyowner and level of cover
b. Are met by a flat initial changes for regular premium plans
c. Are generally covered by cancellation of units in the fund

Question 16

36. 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. Diversification can completely eliminate the risk of investing in stocks in a portfolio;
c. Diversification can involve purchasing different types of stocks and investing in stocks of different countries;
d. Diversification helps to spread the portfolio risk by investing in different categories of investment in a portfolio.

Answer 16

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

Question 17

37. What are the advantages of investing in preferred shares?
    a. It gives shareholders the right to a fixed dividend
    b. Has the priority over the company assets during dissolution
    c. They enjoy benefit of capital appreciation

Answer 17

a. It gives shareholders the right to a fixed dividend
b. Has the priority over the company assets during dissolution
c. They enjoy benefit of capital appreciation

Question 18

38. With traditional participating life insurance products, the allocations to policyowner in the form of dividends
    a. Are not directly linked to the Life company’s investment performance
    b. Are not fixed at the inception of the policy, but are greatly dependent on the investment performance of the life company
    c. Do not have the highs and lows of the investment return as in good investment years of life company
    d. Have already been smothered by the life company

Answer 18

a. Are not directly linked to the Life company’s investment performance
c. Do not have the highs and lows of the investment return as in good investment years of life company
d. Have already been smothered by the life company

Question 19

39. The objectives of satisfying customers need profitably can be achieved by an agent through
    a. Extensive investment training by the company
    b. The giving of monetary assistance and discount to the customers
    c. The giving of freebies to the customers
    d. The use of sales plan, where sales goals, strategies and objectives are coordinated with market analysis, segmentation and targeting

Answer 19

a. Extensive investment training by the company
d. The use of sales plan, where sales goals, strategies and objectives are coordinated with market analysis, segmentation and targeting

Question 20

40. Which of the following statements is TRUE about cash?
    a. Investment in cash increase when there is bull run in the stock market
    b. Investment in cash decrease when interest rates rise
    c. It has high yield potential
    d. Amount invested in cash depends on the size of the cash flow requirement

Answer 20

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

Question 21

41. Under a regular premium variable whole life insurance plan
    a. Withdrawals after the payment of premium a few years are usually allowed
    b. Premium top-ups and holidays, subject to the life company’s administrative rules are usually allowed
    c. Life protection is the main objective of the plan with investment as a nominal purpose
    d. 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

Answer 21

a. Withdrawals after the payment of premium a few years are usually allowed
b. Premium top-ups and holidays, subject to the life company’s administrative rules are usually allowed
c. Life protection is the main objective of the plan with investment as a nominal purpose

Question 22

42. Which of the following statements about investment is FALSE?
    a. People invest money to provide funds for higher education for their children
    b. People invest money in fixed deposits to produce high and guaranteed returns
    c. People invest money to enhance a comfortable standard of living
    d. Investment in commodities has no regular income

Answer 22

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

Question 23

43. Which of the following is/are the main characteristic(s) of a variable life policies?
    a. 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
    b. The withdrawal values and protection benefits are determined by the investment
    c. The policies can be used for investment, as a source of regular savings and protection

Answer 23

b. The withdrawal values and protection benefits are determined by the investment
c. The policies can be used for investment, as a source of regular savings and protection

Question 24

44. Risk can be classified into two particular categories in relation to investment. They include
    a. The risk of rate of return on the investment matching up to individual’s expectation
    b. The risk of losing some or all initial investment
    c. The risk of not losing some or all of a person’s initial investment
    d. The risk of rate of return on the investment not matching up to the individual’s expectation

Answer 24

b. The risk of losing some or all initial investment

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

Question 25

45. The duties of the trustee 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. Acting generally to protect the unit-holders
    c. Holding the pool of money and assets in trust in behalf of the investors
    d. Ensuring that the fund manager adhere to the provision of the trusts deeds

Answer 25

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

Question 26

46. Policy fee payable by variable life insurance policy owner is to cover ______________
    a. The handling charges by professional investment managers;
    b. The price of 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.

Answer 26

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

Question 27

47. The selling price under a variable life insurance policy is:
    a. The price at which units under 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 the life of the policy.

Answer 27

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

Question 28

48. Diversification in investment involves ______________
    a. Putting all the funds under management into one category of investment;
    b. Spreading the risk of investment by not putting the fund into several categories investments;
    c. Reducing the risk of investment by putting one fund under management into several categories of investment;
    d. Reducing the risk of investment by putting all one’s eggs in one basket

Answer 28

c. Reducing the risk of investment by putting one fund under management into several categories of investment;

Question 29

49. Variable life funds can be invested in any financial instruments including cash funds, bond funds, equity finds, 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. Investment in shares of stocks and during market recession, such as assets are usually the last to depreciate;
c. Invest in shares of stock which are inherently of lower risk in nature and the prices of stocks are stable;
d. Investment in share of stocks and investor who buys such assets usually aims for capital appreciation

Answer 29

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