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VUL Flashcards

1
Q

Statements on the top-up under variable life insurance product

A

A. 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
B. To top-up a policy, the policy owner pays further single premium at the time of top-up
C. Policy owners are normally allowed to top-up their policies at any time, subject to a minimum amount

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2
Q

Disadvantages when investing in common shares

A

A. Investors are exposed to market and specific risks

B. Shares can be worthless if company becomes insolvent

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3
Q

Statements about the flexibility features of variable life policies

A

A. Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing at bid price
B. Policyholders have the flexibility of switching from one fund to another, provided it satisfies the company’s switching criteria
C. Policyholders have the flexibility of increasing or decreasing their premiums for regular premiums variable life 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

Fixed income securities

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5
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

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6
Q

Characteristics of variable life policy

A

A. Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets
B. Its protection costs are generally met by explicit charges
C. Its withdrawal value is normally the value of units allocated to the policy owner calculated at the bid price

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7
Q

The policy value of endowment policies is the…

A

Cash values plus any accumulated dividends less any outstanding loans due at time of surrender

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8
Q

The life company needs to maintain…

A

A separate account for variable life policies distinct from the general account

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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

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10
Q

An investor in variable life funds gets to enjoy these benefits

A

A. Policy owners have access to pooled or diversified portfolios of investment
B. 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
C. Policy owners can gain access to variable life funds managed by professional investment managers with proven track records

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11
Q

This is prohibited under insurance code; Deals with offering the prospect a special inducement to purchase a policy.

A

Rebating

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12
Q

Will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholders as cash dividends

A

Life insurance company

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13
Q

Top-up single premium injections are allowed un these plans; Policyholders have the flexibility of varying the level cover

A

single premium life policy

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14
Q

The cash withdrawal value is not guaranteed; the volatility of the returns depends on the investment strategy of the fund.

A

Variable life policies

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15
Q

Generally have larger exposure to equity investment that with participating and other traditional policies; Commissions and company expenses are met by a variety of explicit charges, some of which are variable.

A

Variable life policies

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16
Q

The facility to do switching under a variable life insurance policy is very useful for…

A

The purpose of financial planning by the policy owners

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17
Q

The flexibility of investing in variable life funds includes these benefits:

A

A. Policy owners can easily change the level of sum assured and switch their investment between funds
B. Policy owners can take premium holidays and add single premium top-ups
C. Policy owners can easily change the level of their premium payment.

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18
Q

Risk of investing in variable life funds

A

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

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19
Q

A diversified portfolio…

A

A. Provides greater security to an investor having to sacrifice the return for the portfolio
B. Can involve purchasing different types of stocks and investing in stocks of different countries.

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20
Q

In traditional life insurance products, the allocations to policy owners in the form of dividends

A

A. Have already been smoothened by the life company.
B. Do not have the highs and lows of investment returns as in good investment years of the life company
C. Are not fixed at the inception of the policy, but are greatly dependent of the investment performance of the life company.

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21
Q

Amount invested in this depends on the size of the cash flow requirement

A

Cash

22
Q

Main characteristics of variable life policies

A

A. The policies can be used, as a source of regular savings and protection
B. The withdrawal values and protection benefits are determined by the investment performance of the underlying assets.

23
Q

Duties of trustees

A

A. Ensuring that the fund manager adhere to the provision of trust deeds
B. Acting generally to protect the unit-holders
C. Holding the pool of money and assets in trust in behalf of the investors

24
Q

The policy fee payable by the variable life insurance policy owner is to cover…

A

The administrative expenses of setting up the variable life insurance policy

25
Q

In risk-return profile of bond funds, cash funds, managed funds, balanced funds, and equity funds, a risk return graph will show that..

A

A. Higher return normally comes with higher risk.
B. At the top of the end of the graph are the equity funds.
C. The relatively risk-less cash funds sit at the bottom end of the graph

26
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 share of stocks and investor who buys such assets usually aims for capital appreciation.

27
Q

The investment returns under variable life insurance…

A

A. Are not guaranteed
B. Are nit assured
C. Fluctuate according to the rise and fall of market prices.

28
Q

A specific form of misinterpretation

A

Twisting

29
Q

A facility allowing policyholder to switch to another variable life funds offered by the company

A

Switching

30
Q

Difference between variable life policies and endowment policies:

A

The premiums and benefits of the endowment policies are described at the inception of the policy whereas variable life policies are flexible as they are account driven

31
Q

Used to cover the management cost of the (variable life) policy

A

The margin between the bid and offer price

32
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 moderate level of risk tolerance. What kind of policy would you recommend him to buy?

A

Variable life policies

33
Q

It refers to an agent including a policyholder to discontinue a policy with another company without disclosing the disadvantage of doing so; It includes misleading or incomplete comparison of policies.

A

Twisting

34
Q

Least liquid to most liquid

A

A. Property
B. Equity
C. Shirt Term Securities
D. Cash

35
Q

Policy benefits are directly linked to the investment performance of underlying assets

A

Benefits of variable life policies

36
Q

Investing bonds offer

A

A. Protection to the principal and guaranteed steady stream of income
B. Being a place of temporary refuge when the investor foresees that the market outlook is uncertain
C. Allowing the investor a chance for capital preservation

37
Q

Benefits In a variable life fund

A

A. The fund provides a diversified portfolio, thus lowering the risk of investment
B. The fund relieves the investor from the hassle of administering his/her investment
C. The fund enables small investors to participate in a pool of diversified portfolio in which he/she with low investment capital is likely to have acceded to

38
Q

Differences between traditional participation life insurance and variable life insurance include:

A

A. 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 units of investment
B. Variable life insurance policies offer the potential for higher returns
C. Traditional participating life policies offer the potential for higher returns

39
Q

Advantages in investing preferred shares are:

A

A. It gives shareholder the right to a fixed dividend
B. Has the priority over company assets during dissolution
C. They enjoy benefit of capital appreciation

40
Q

In regular premium, variable whole life insurance plan:

A

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

41
Q

Two particular risk categories in relation to investment. The include:

A

A. The risk rate of return on the investment not matching up to the individual’s expectation
B. The risk of losing some or all of the persons initial investment

42
Q

The selling price under a variable life insurance policy is

A

The price at which units under the policy are offered for sake by the life company

43
Q

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

A

A. The variable life funds offer policyholders an access to pooled or diversified portfolios
B. The variable life policy holder can vary his premium payments, take premium holidays, add single premium top-ups, and change the level of sum assured easily.
C. Can have access to a poll of qualified and trained professional fund managers

44
Q

In variable life insurance policies

A

A. Each of the policy owner’s premium will be used to purchase units, the number which is dependent on the selling price for each unit
B. Purchase of units can only he made from the variable life fund itself, which will then create new units and add the investment monies to the value of the fund

45
Q

Why is it important that the customer has to understand the sales proposal completely

A

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

46
Q

A single premium variable life insurance policy must be issued with

A

A minimum death benefit

47
Q

The amount of surrender value is usually higher then…

A

The amount under non-participating policies and it varies with the age of the assured, being lower at older ages

48
Q

Under a variable life insurance policy, the protection costs:

A

A. Are generally covered by cancellation of units in the fund
B. Are generally met by explicit charges stipulated openly in the policy terms
C. Vary with age of policy owner and level of coverage

49
Q

The objective of satisfying the needs of the customers can be achieved by an agent through…

A

A. Extensive investment training by the company
B. The use of sales plan. Where sales goals, strategic and objectives are coordinated with market analysis, segmentation and targeting

50
Q

In investment objectives

A

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

51
Q

Investment diversification involves

A

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

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