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Questions and Answers
A UNIT TRUST is
A UNIT TRUST is
What is the most suitable investment instrument for someone who is interested in protecting his principal while receiving a steady stream of income?
What is the most suitable investment instrument for someone who is interested in protecting his principal while receiving a steady stream of income?
Which one of the following statements about the flexibility features of variable life policies is FALSE?
Which one of the following statements about the flexibility features of variable life policies is FALSE?
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
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
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Which of the following statements about the option to top-up under variable life insurance products is 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 policy owner pays further single premium at the time of top-up
IV. Policy owners are normally allowed to top-up their policies at any time, subject to a minimum amount
Which of the following statements about the option to top-up under variable life insurance products is 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 policy owner pays further single premium at the time of top-up IV. Policy owners are normally allowed to top-up their policies at any time, subject to a minimum amount
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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
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
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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
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
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Variable life insurance policy owners may withdraw in terms of
Variable life insurance policy owners may withdraw in terms of
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Which of the following statements 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 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.
Which of the following statements 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 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.
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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 implicit 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
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 implicit 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
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The facility to do switching under a variable life insurance policy is very useful ______
The facility to do switching under a variable life insurance policy is very useful ______
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Which of the following statements about 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
Which of the following statements about 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
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Which of the following statements about single premium variable life policies 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
Which of the following statements about single premium variable life policies 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
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Which one of the following statements is FALSE?
Which one of the following statements is FALSE?
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In traditional 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
In traditional 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
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Which one of the following statements about an investor diversifying his portfolio is FALSE?
Which one of the following statements about an investor diversifying his portfolio is FALSE?
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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
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:
- Charges and Fees are deducted after the single premium has been invested into the account
- The growth rate of the unit price and the bid-offer spread is maintained at 8% and 4.5% respectively
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 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:
- Charges and Fees are deducted after the single premium has been invested into the account
- The growth rate of the unit price and the bid-offer spread is maintained at 8% and 4.5% respectively
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Which of the following statements about risks of investing in variable life funds is TRUE?
Which of the following statements about risks of investing in variable life funds is TRUE?
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The flexibility of investing in variable life funds includes these benefits:
I. Policy owner 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 cater separately for investment and insurance protection
IV. Policy owners can easily change the level of their premium payment
The flexibility of investing in variable life funds includes these benefits:
I. Policy owner 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 cater separately for investment and insurance protection IV. Policy owners can easily change the level of their premium payment
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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
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
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The policy fee payable by a variable life insurance policy owner is to cover
The policy fee payable by a variable life insurance policy owner is to cover
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Which of the following duties of the trustees are FALSE?
Which of the following duties of the trustees are FALSE?
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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
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
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Which of the following statements is true about cash?
Which of the following statements is true about cash?
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Investment diversification involves
Investment diversification involves
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In investment objectives, which of the statements is FALSE?
In investment objectives, which of the statements is FALSE?
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The objective of satisfying the needs of the customers 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
The objective of satisfying the needs of the customers 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
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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
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
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Which of the following statements about surrender value under traditional participating life insurance products is TRUE?
Which of the following statements about surrender value under traditional participating life insurance products is TRUE?
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A single premium variable life insurance policy must be issued with
A single premium variable life insurance policy must be issued with
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Why is it important that the customer has to understand the sales proposal completely?
Why is it important that the customer has to understand the sales proposal completely?
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In variable life insurance policies
I. There is no guaranteed minimum sum assured for the purposed of declaring dividends
II. There is not 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 for 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
In variable life insurance policies I. There is no guaranteed minimum sum assured for the purposed of declaring dividends II. There is not 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 for 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
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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 a pool of qualified and trained professional fund managers
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 a pool of qualified and trained professional fund managers
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The selling price under a variable life insurance policy is:
The selling price under a variable life insurance policy is:
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There are two particular risk 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
There are two particular risk 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
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In 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
In 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
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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
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
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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 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
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
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 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 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
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Which of the following statements about benefits in a variable life fund is FALSE?
Which of the following statements about benefits in a variable life fund is FALSE?
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Investing in bonds offer the following advantages with the exception of
Investing in bonds offer the following advantages with the exception of
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Which of the following best describes the benefits of variable life policies?
Which of the following best describes the benefits of variable life policies?
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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
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
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Which of the following statements about twisting are TRUE?
I. Twisting is a special form of misrepresentation
II. It refers to an agent inducing a policyholder to discontinue policy with another company without disclosing the disadvantage 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
Which of the following statements about twisting are TRUE?
I. Twisting is a special form of misrepresentation II. It refers to an agent inducing a policyholder to discontinue policy with another company without disclosing the disadvantage 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
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Which of the following statements about variable life policies are TRUE?
I. Offer price is used to determined 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
Which of the following statements about variable life policies are TRUE?
I. Offer price is used to determined 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
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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 of variable life and endowment policies directly accrue to the policyholders
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 of variable life and endowment policies directly accrue to the policyholders
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Which of the following statements is FALSE?
Which of the following statements is FALSE?
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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
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
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Variable life funds can be invested in any financial instruments including bond funds, property funds, specialized funds and equity funds. Equity funds
Variable life funds can be invested in any financial instruments including bond funds, property funds, specialized funds and equity funds. Equity funds
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Mr. Cruz is currently earning Ps. 30,000/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 him to buy?
Mr. Cruz is currently earning Ps. 30,000/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 him to buy?
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Which of the following statements about the differences between variable life policies and endowment policies are FALSE?
Which of the following statements about the differences between variable life policies and endowment policies are FALSE?
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Flashcards
Unit Trust
Unit Trust
A collective investment scheme where a trustee holds assets on behalf of investors.
Fixed Income Securities
Fixed Income Securities
Investment instruments providing regular interest payments and return of principal at maturity.
Variable Life Policies
Variable Life Policies
Life insurance policies with cash value linked to investment performance and flexible premiums.
Withdrawal Value
Withdrawal Value
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Rebating
Rebating
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Diversification
Diversification
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Surrender Value
Surrender Value
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Twisting
Twisting
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Policy Fee
Policy Fee
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Bid-offer Spread
Bid-offer Spread
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Investment Objectives
Investment Objectives
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Cash Withdrawal
Cash Withdrawal
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Commission
Commission
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Equity Funds
Equity Funds
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Mortality Charges
Mortality Charges
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Professional Fund Managers
Professional Fund Managers
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Premium Holidays
Premium Holidays
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Investment Performance
Investment Performance
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Market Risk
Market Risk
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Endowment Policies
Endowment Policies
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Life Cover
Life Cover
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Bid Price
Bid Price
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Volatility
Volatility
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Cash Value
Cash Value
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Fund Performance
Fund Performance
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Liquidity
Liquidity
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Top-up Premiums
Top-up Premiums
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Investment Control
Investment Control
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Study Notes
Unit Trust
- A unit trust is established by a trust deed that allows a trustee to hold pooled money and assets on behalf of investors.
- A close-end fund does not have to sell its assets even if many investors sell their shares.
- An investor buys units in the trust, not shares in a company.
- It's registered with the Securities and Exchange Commission (SEC) and invests in various equities.
Suitable Investment Instrument
- For protecting principal and receiving a steady income, fixed-income securities are the most suitable investment instrument.
- Equities, warrants, and variable life policies are other options, but fixed-income securities offer consistent income streams and principal protection.
Variable Life Policies - Flexibility Features
- Policyholders can withdraw a portion of their policy's value, with withdrawals met by cashing units at the bid price.
- Policyholders can borrow against their variable life policies up to their full withdrawal value.
- Policyholders can switch funds if the company allows it.
- Policyholders have flexibility to adjust their premiums. A statement that policyholders can decrease their premiums is included, but this isn't a "false" statement.
Common Shares - Disadvantages
- Dividends are not fixed.
- Investors are exposed to market risks.
- Share value can become worthless if the company becomes insolvent.
Top-up Variable Life Insurance Products (True/False)
- Policyholders can buy additional units in the fund, which are allocated to new policies.
- Further premiums are used to acquire more units, after deducting top-up charges.
- Top-ups are usually allowed at any time, subject to minimum amounts.
Rebating (False Statement)
- Rebating is prohibited by the Insurance Code.
- Rebating aims to boost sales and enhance agent prestige.
Investor Benefits in Variable Life Funds
- Access to diversified portfolios.
- Flexibility to change premium payments.
- Access to professional fund managers.
Variable Life Policy Withdrawals
- Policyholders can withdraw units or a fixed amount, possibly through reducing the life cover sum assured.
False Statements (Variable Life Policies)
- Policy values for variable life policies are determined at the valuation time, using an offer price, plus accumulated dividends and less any outstanding loans.
- Life insurance companies must maintain separate accounts from general accounts for variable life policies.
Variable Life Insurance Policy Characteristics
- Withdrawal value and protections depend on investment performance.
- Protection costs are met by implicit charges.
- Commission and company expenses have a 6-month notice period before change.
- Withdrawal value is based on unit values at the bid price.
Switching under Variable Life Insurance Policies
- Switching allows profit planning for life policies.
- Switching is for assets planning for trustees of funds.
- Switching is used in sales planning for fund managers.
- Switching is for financial planning by the policyholders.
Variable Life Policy Statements
- Variable life policies expose policyholders to a higher degree of equity, than other traditional policies.
- Protection costs are generally covered by implicit charges, which vary by age and cover level.
- Variable costs are explicit fees or charges.
Statement about Variable Life Policies
- Cash withdrawal value is not guaranteed.
- Volatility of variable life returns depends on investment strategy of the fund.
- Variable policyholders don't control investment decisions in the fund.
Single Premium Variable Life Policies (True/False)
- No fixed term in single premium variable policies.
- Top-up single premium injections are allowed.
- Policyholders have variable levels of cover.
Statements about Variable Life Insurance Policies-False
- Variable life insurance policies link values to life company investment performance (indirectly).
- Surplus funds from life companies can be distributed to participating members in cash dividends.
- Variable policies aren't only for investment but are investment products with future benefits (Whole life/Endowment).
Traditional Life Insurance Dividends
- Dividend allocations are not directly linked to life company performance.
- Dividends depend on investment performance, which can fluctuate.
Investor Diversification
- Diversified portfolios can reduce risk; however, they do not completely eliminate risk.
- A diversified portfolio involves investing in different types of stocks.
Financial Planning Considerations for Mr. Cruz
- Mr. Cruz, with a moderate risk tolerance and substantial savings, could invest in variable life policies.
Variable Policies (True/False Statements)
- Variable policies have offer and bid prices that cover management costs.
Differences between Variable Life Policies and Endowment Policies (False Statements)
- The policies' values reflect the performance of the life company.
- The premiums and benefits of endowment policies are described at inception but are fixed.
- Variable life policies' benefits and risks are account-driven.
Variable Life Insurance
- Protection costs are covered by flat initial charges, cancellation of units, explicit policy terms, and factors like policyholder age/coverage.
Single Premium Variable Life Policies
- Offer maximum withdrawal benefits.
- Offer minimal withdrawal benefits.
- Variable policies typically involve no guaranteed death benefit with fixed values.
Investment Returns in Variable Life Insurance
- Investment returns aren't guaranteed, they depend on the performance of the investment fund managed in the life company.
- These returns are variable and affected by market fluctuations.
Investment in Variable Life Funds
- Variable funds can be invested in variety of financial instruments.
- Investing in stock prices are usually linked to market fluctuations.
- Investors may look to stocks for capital appreciation.
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Description
This quiz focuses on unit trusts, suitable investment instruments, and the features of variable life policies. Test your knowledge about pooled investments, fixed-income securities, and the benefits of variable life policies in financial planning.
