VUL
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Questions and Answers

Variable life insurance policy owners may make withdrawals in terms of

  • Number of units or fixed monetary amount through cancellation of units (correct)
  • Number of units or fixed monetary amount through reduction of the life cover sum assured
  • Fixed monetary amount only through reduction of the life cover sum assured
  • Number of units through cancellation of units

    • Which of the following statements about the flexibility features of variable life policies is FALSE?

  • 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
  • Policy holders can take loans against their variable life policies up to the entire withdrawal value of the policies (correct)
  • Policy holders have the flexibility of switching from one fund to another provided it satisfies the company's switching criteria
  • Policy holders have the flexibility of increasing or decreasing their premiums for regular premiums variable life policies

    • 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 management by the life company IV. Fluctuate according to the rise and fall of market prices

  • I, II and III
  • I, II and IV
  • I, III and IV (correct)
  • II, III and IV

    • Which of the following statements are TRUE?

    I. The policy value of variable life policies is determined 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

    <p>II and III</p> Signup and view all the answers

    Which of the following statements is FALSE?

    <p>Misrepresentation is a specific form of twisting</p> Signup and view all the answers

    Which of the following statements about variable life policies are TRUE?

    I. Offer price is used to determine the number 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 of the bid price of units allocated into the policy

    <p>II and III</p> Signup and view all the answers

    What is the most suitable investment instrument for an investor who is interested in protecting his principal and receiving a steady stream of income?

    <p>Fixed income securities</p> Signup and view all the answers

    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

    <p>II, III</p> Signup and view all the answers

    Which of the following statements about the differences between variable life insurance policies and endowment policies are false?

    I. The policy values of variable life and endowment policies directly affect the performance of the fund of the life insurance 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 policy holders

    <p>I and III</p> Signup and view all the answers

    Which of the following statements about twisting is FALSE?

    <p>It refers to an agent offering a prospect a special inducement to purchase a policy</p> Signup and view all the answers

    Mr. Juan dela Cruz is currently earning P30,000/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 for him to buy?

    <p>Variable life policies</p> Signup and view all the answers

    What are the benefits available when investing in variable life funds? I. The variable life funds offer policy holder and access to a pooled or diversified portfolios II. The variable life policy holder can vary his premium payments, take premium holidays, add single premium top-ups and change the level of the sum assured easily III. The variable life policy holder can have access to a pool of qualified and trained professional fund managers

    <p>I, II and III</p> Signup and view all the answers

    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

    <p>II, I, IV, III</p> Signup and view all the answers

    A unit trust is

    <p>Established by a trust deed which enables trustees to hold the pool of money and asses in trust on behalf of the investor</p> Signup and view all the answers

    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 premiums 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

    <p>III and IV</p> Signup and view all the answers

    The benefits of investing in variable 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.

    <p>I, II and III</p> Signup and view all the answers

    Which of the following BEST describes the policy benefits of variable life policies?

    <p>The policy benefits are directly linked to the investment performance of the underlying assets</p> Signup and view all the answers

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

    <p>Because the impact of changes in investment or condition on variable life policy borne solely by the customer</p> Signup and view all the answers

    Which of the following statements about rebating 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

    <p>I and II</p> Signup and view all the answers

    Which of the following statements is FALSE?

    <p>Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company</p> Signup and view all the answers

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

    <p>Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies</p> Signup and view all the answers

    The 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 cost is generally met by implicit charges III. Its commission and company expenses are met by a variety of implicit chargers with normally 6months' notice given by the life companies prior to any change. IV. Its withdrawal value is normally the value of units allocated to the policy owners calculated at the bid price

    <p>I, II and IV</p> Signup and view all the answers

    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 single premium injections are allowed in these plans III. Policy holders have the flexibility of varying the level cover

    <p>II and III</p> Signup and view all the answers

    Investing in bonds offer the following advantages EXCEPT

    <p>It enables the investors an opportunity for capital appreciation</p> Signup and view all the answers

    Which of the following statements about variable life 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 policy holder has direct control over the investment decisions of the variable life fund

    <p>I and II</p> Signup and view all the answers

    single premium variable life insurance policy:

    <p>Must be issued with a minimum death benefit</p> Signup and view all the answers

    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 chargers, some of which are variable

    <p>I and II</p> Signup and view all the answers

    Which of the following statements about benefits in variable life fund is FALSE?

    <p>The fund ensures definite high yield for investors since it is managed by professionals who are well-versed in the management of risks of investment portfolios</p> Signup and view all the answers

    The flexibility benefits of investing in variable life 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 products have a simple product design with a clear structure which caters separately for investment and insurance protection IV. Policy owners can easily change the level of the premium payment

    <p>II and IV</p> Signup and view all the answers

    The fundamental differences 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 a 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

    <p>II, III and IV</p> Signup and view all the answers

    The switching facility under variable life insurance policies is very useful

    <p>For the purpose of financial planning by the policy owners</p> Signup and view all the answers

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

    <p>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.</p> Signup and view all the answers

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

    <p>Policy owners who invest in variable life funds with high equity investment face greater risk can expect to achieve higher return than traditional life insurance product over the long term</p> Signup and view all the answers

    What would be the withdrawal value after a year

    <p>Ps. 401,107.58</p> Signup and view all the answers

    The protection costs under a variable life insurance policy I. Are met by flat initial charges for regular premium plans II. Are generally covered by cancellation 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

    <p>I, II and IV</p> Signup and view all the answers

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

    <p>Diversified can completely eliminate the risk of investing in stocks in a portfolio</p> Signup and view all the answers

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

    <p>I, II and III</p> Signup and view all the answers

    With 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 return as in good investment years o life company IV. Are not fixed at the inception of the policy, but are greatly dependent on the investment performance of the life company

    <p>II, III and IV</p> Signup and view all the answers

    The objective of satisfying customers' needs profitably can be achieved by ana 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 market analysis, segmentation and targeting IV. The giving of monetary assistance and discount to the customers

    <p>II and III</p> Signup and view all the answers

    Which of the following statements is true about CASH?

    <p>Amount invested in cash depends on the size of the cash flow requirements</p> Signup and view all the answers

    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

    <p>II and III</p> Signup and view all the answers

    Which of the following statements about investment objectives is FALSE?

    <p>People invest money in fixed deposits to produce high and guaranteed returns</p> Signup and view all the answers

    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 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

    <p>I and II</p> Signup and view all the answers

    Risk can be classified into two particular categories in relation to investment. The 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 rate of return on the investment matching the individual's expectation IV. The risk of losing some or all of a person's initial investment

    <p>II and IV</p> Signup and view all the answers

    The duties of the trustees of unit trust do not include:

    <p>Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself</p> Signup and view all the answers

    Policy fee payable by variable life insurance policy owner is to cover

    <p>The administrative expenses of setting up the variable life insurance policy</p> Signup and view all the answers

    The selling price under a variable life insurance policy is

    <p>The price at which units under the policy are offered for the sale by the life company</p> Signup and view all the answers

    In risk-return profile of cash funds, bond funds, balanced funds, managed 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

    <p>II, III and IV</p> Signup and view all the answers

    Diversification in investment involves

    <p>Reducing the risks of investment by putting one fund under management into several categories of investment</p> Signup and view all the answers

    Variable life funds can be invested in any financial instruments including cash funds, bond funds, equity funds, property funds, specialized funds and diversified funds. Equity funds

    <p>Invest in shares of stocks and investors who usually buy such assets usually aim for capital appreciation</p> Signup and view all the answers

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