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VUL Review > VUL Reviewer > Flashcards

VUL Reviewer Flashcards

1
Q
  1. Variable life insurance policy owners may make withdrawals in terms of _____.
    a. Number of units or fixed monetary amount through cancellation of units;
    b. Number of units or fixed monetary amount through 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

d. Number of units through cancellation of units.

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2
Q
  1. Which of the following statements about flexibility features of variable life policies is FALSE?
    a. Policy holders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at bid price;
    b. Policy holders can take loans against their variable life up to the entire withdrawal value of their policies;
    c. Policy holders have the flexibility of switching from one fund to another provided it satisfies the company’s switching criteria;
    d. Policy holders have the flexibility of increasing or decreasing their premiums for regular premium variable life policies.
A

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

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3
Q
  1. 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
    company
    IV. Fluctuate according to the rise and fall of 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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4
Q
  1. 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 value 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. I and II
    b. I, II and III
    c. I and III
    d. II and III
A

d. II and III

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5
Q
  1. 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 policyholders to switch to another variable life funds
    offered by the company
A

c. Misrepresentation is a specific form of twisting

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6
Q
  1. 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 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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7
Q
  1. What is the most suitable investment instrument for an investor who is interested in
    protecting his principal and 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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8
Q
  1. What are the disadvantages of 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, II and III
A

c. II and III

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9
Q
  1. Which of the following statements about the difference 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 are flexible as they are account driven;
    III. The benefits and risk of variable life endowment policies directly accrue to the policyholders.
    a. I and II
    b. I, II and III
    c. I and III
    d. II and II
A

a. I and II

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10
Q
  1. 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 policy with another
    company without disclosing the disadvantages 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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11
Q
  1. Mr. Juan dela Cruz is currently earning Php30,000.00 per month. He is 35 years old and 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?
    a. Participating Endowment
    b. Variable Life Policies
    c. Participating Whole Life
    d. Annuities
A

c. Participating Whole Life

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12
Q
  1. What are the benefits available when investing in variable life funds?
    I. The variable life funds offer policyholders an access to a 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 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

a. I and II

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13
Q 
13. Rank the following in terms of their liquidity, from the least liquid to the most liquid.
I. Short Term securities
II. Property
III. Cash
IV. Equities
a. IV, II, III, I
b. III, I, IV, II
c. II, I, IV, III
d. II, IV, I, II
A

c. II, I, IV, III

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14
Q
  1. 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-off if large number of investors sell
    their shares;
    c. One whereby investors buy 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 investment.
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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15
Q
  1. 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 the investment monies to the value of the fund.
    a. I and IV
    b. II and IV
    c. III and IV
    d. II and III
A

c. III and IV

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16
Q
  1. 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 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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17
Q
  1. Which of the following BEST describes the policy 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;

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18
Q
  1. Why is it important that the customer must 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 is borne solely by the customer;
    c. Because the agent may give the wrong recommendations;
    d. Because the policyholder expects higher returns.
A

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

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19
Q
  1. Which of the following statements about rebating is 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
A

a. I and II

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20
Q
  1. Which 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 policyholder 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 ——– of the portfolio.
A

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

21
Q
  1. 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
A

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;

22
Q
  1. The characteristic 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-month notice given by the life companies prior to any change;
    IV. Its withdrawal value is normally the value units allocated to the policy owner calculated at the bid price.
    a. I, II and III
    b. II, III and IV
    c. I, II and IV
    d. I, III and IV
A

c. I, II and IV

23
Q
  1. 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. Policy holders have the flexibility of varying the level cover.
    a. I, II and III
    b. II and III
    c. I and II
    d. I and III
A

c. I and II

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

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

25
Q
  1. Which of the following statements about variable 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 decision of
    the variable life fund.
    a. I, II and III
    b. I and II
    c. I and III
    d. II and III
A

a. I, II and III

26
Q
  1. Single premium variable life insurance policy:
    a. Must be issued with a minimum death benefit
    b. Must be issued with a maximum withdrawal value
    c. Has no death benefit
    d. Has not withdrawal value
A

a. Must be issued with a minimum death benefit

27
Q
  1. Which of the following statements about characteristics of variable life policies are TRUE?
    I. Variable life policies generally have a 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 & II
    c. II and III
    d. I and III
A

d. I and III

28
Q
  1. Which of the following statements about benefits in 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 an 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 an investor since it is managed by professionals who are well-versed in the management of risks of investment portfolios;

29
Q
  1. 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.
    a. All of the above
    b. I, II and III
    c. I, II and IV
    d. I, III and IV
A

d. I, III and IV

30
Q
  1. The fundamental difference 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 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.
    a. I, III and IV
    b. II, III and IV
    c. I, II and III
    d. I, II and IV
A

d. I, II and IV

31
Q
  1. 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 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.

32
Q
  1. The following statement about surrender value under traditional participating life insurance
    products is TRUE….
    a. Cash value is paid when yearly renewable term insurance policy is surrendered;
    b. When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with number of units;
    c. The amount of surrendered value is usually higher than the amount under nonparticipating policies and it varies with the age of the assured, being lower at older ages;
    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
A

c. The amount of surrendered value is usually higher than the amount under nonparticipating policies and it varies with the age of the assured, being lower at older ages;

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

c. Policy owners 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.

34
Q 
34. What would be the withdrawal values after a year?
Offer Price = Php16.00
Bid-offer spread = 4.5%
Number of units bought = 25,000
Policy Fee = Php1,800.00
Admin & Mortality charge = Php8,750.00
Top Up fee = Php700.00
Admin fee for Top Up = Php2,000.00
Sum assured is 190% of single premium or 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 bid-offer spread is maintained at 8% and 
4.5% respectively
a. Php 423,000.00
b. Php 420,069.02
c. Php 401,107.58
d. Php 412,500.00
A

c. Php 401,107.58

35
Q
  1. The protection cost under a variable life insurance policy _______________
    I. Are met by flat initial charges for regular premium plans
    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 cover
    a. I, II and III
    b. I, II and IV
    c. I, III and IV
    d. II, III and IV
A

b. I, II and IV

36
Q
  1. 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
A

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

37
Q
  1. What are the advantages of investing in preferred shares?
    I. It gives shareholders the right to a fixed dividend;
    II. Has the priority over the 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 II
A

a. I, II and III

38
Q
  1. With traditional participating life insurance products, the allocations to policy owner 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 the investment return as in good investment years of 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, II and III
    b. I, II and IV
    c. I, III and IV
    d. II, III and IV
A

a. I, II and III

39
Q
  1. The objective of satisfying customers need profitably ca be achieved by an agent through:
    I. The giving of freebies to the customers
    II. Extensive investment training by the company
    III. The use of sales plan, where sales goals, strategies and objectives are
    coordinated with the 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 III
    d. II, III and IV
A

b. II and III

40
Q
  1. Which one 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 requirements
    c. Investment in cash increase when there is a bull run in the stock market
    d. Investment in cash decreases when interest rates risk\e
A

b. Amount invested in cash depends on the size of the cash flow requirements

41
Q
  1. Under a regular premium variable shoe 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

42
Q
  1. 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 of living
    c. People invest money to provide funds for higher education of their children
    d. Investment in commodities has no regular income
A

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

43
Q
  1. Which of the following is/are the main characteristic(s) 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
    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

44
Q
  1. 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 initial investment.
    a. I and III
    b. I and II
    c. III and IV
    d. II and IV
A

d. II and IV

45
Q
  1. 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. Ensuring that the fund manager adhere to the provision of the trust 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;

46
Q
  1. 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
A

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

47
Q
  1. 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
A

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

48
Q
  1. 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.
A

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

49
Q
  1. 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.
A

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

VUL Review (4 decks)

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