Variable Life Insurance Mock Exam

<p>It must be issued with a minimum death benefit (B)</p> Signup and view all the answers

<p>Investment elements are disclosed at the outset in variable life insurance (C)</p> Signup and view all the answers

<p>Higher risk of substantial losses (C)</p> Signup and view all the answers

<p>Mitigation of systemic risks by spreading investments (C)</p> Signup and view all the answers

<p>Investment options being less transparent to the policyholder (A)</p> Signup and view all the answers

<p>They allow for varying the level of cover. (D)</p> Signup and view all the answers

<p>It is established by a trust deed held by a trustee. (D)</p> Signup and view all the answers

<p>To achieve capital appreciation over time. (B)</p> Signup and view all the answers

<p>They guarantee a fixed cash value regardless of market conditions. (C)</p> Signup and view all the answers

<p>Real estate trusts (C)</p> Signup and view all the answers

<p>To enable a trustee to hold assets on behalf of investors. (C)</p> Signup and view all the answers

<p>Equities (A)</p> Signup and view all the answers

<p>Guaranteed payment at death or maturity. (D)</p> Signup and view all the answers

<p>The agent is engaging in deceptive practices. (B)</p> Signup and view all the answers

<p>At the top end of the graph. (B)</p> Signup and view all the answers

<p>The bid-offer spread decreases the value of investment. (D)</p> Signup and view all the answers

<p>Endowment policies have flexible premiums. (B)</p> Signup and view all the answers

<p>Administrative charges are deducted after the single premium is invested. (B)</p> Signup and view all the answers

<p>Cash funds usually provide low returns with low risk. (D)</p> Signup and view all the answers

<p>It confirms that endowment policies have predetermined benefits and costs. (B)</p> Signup and view all the answers

<p>It will reduce the investment value by 4.5%. (A)</p> Signup and view all the answers

<p>Number of units or fixed monetary amount through reduction of life cover sum assured (B), Number of units or fixed monetary amount through cancellation of units (C)</p> Signup and view all the answers

<p>Commissions and company expenses are met by a variety of explicit charges, including some that are variable. (C)</p> Signup and view all the answers

<p>Policy owners have access to pooled or diversified portfolios of investment. (A)</p> Signup and view all the answers

<p>There is no fixed term, making them technically whole life insurance policies. (D)</p> Signup and view all the answers

<p>The costs associated with protection are solely fixed and do not vary. (B), Policy owners do not have access to diversified portfolios. (C), They typically have a significant allocation to traditional fixed-income investments. (D)</p> Signup and view all the answers

<p>Expert management increases the potential for higher returns compared to non-managed funds. (D)</p> Signup and view all the answers

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

<p>Twisting occurs solely when an agent misrepresents a policy's costs. (C)</p> Signup and view all the answers

<p>All costs are explicitly stated in the policy documentation. (C)</p> Signup and view all the answers

<p>The fund ensures definite high yield for an investor since it is managed by professionals (B)</p> Signup and view all the answers

<p>The policy value of endowment policies is the cash value plus any accumulated dividends (D)</p> Signup and view all the answers

<p>Variable life insurance typically offers variable premiums linked to investment performance. (D)</p> Signup and view all the answers

<p>Policy owners can easily change the level of sum assured and switch their investment between funds. (A)</p> Signup and view all the answers

<p>Because the insurer does not guarantee any return on investment. (C)</p> Signup and view all the answers

<p>Policy owners may buy new variable life insurance policies during the top-up process (B)</p> Signup and view all the answers

<p>Rebating refers to offering special incentives to prospects to purchase a policy. (B)</p> Signup and view all the answers

<p>They guarantee a fixed interest rate for the duration of the investment (C)</p> Signup and view all the answers

<p>To ensure that the investment returns are based solely on the performance of the separate account (D)</p> Signup and view all the answers

<p>They feature a clear structure that separates investment and insurance protection. (A)</p> Signup and view all the answers

<p>Claiming a higher guaranteed return than what is actually offered. (A)</p> Signup and view all the answers

<p>They involve guaranteed returns regardless of market conditions (B)</p> Signup and view all the answers

<p>They provide benefits that can be less predictable than whole life plans (D)</p> Signup and view all the answers

<p>It is a facility enabling policyholders to switch to another variable life fund offered by the company. (A)</p> Signup and view all the answers

<p>The opportunity to invest in a pool of diversified portfolios (B)</p> Signup and view all the answers

Distributing investments across various asset classes to reduce risk. Imagine a farmer planting different crops, some might fail but others will thrive, ensuring a stable harvest.

Variable life insurance policies offer the potential for higher returns, but also come with the risk of lower returns.

A type of variable life insurance policy that requires a single premium payment. The policy offers flexibility with investment options.

A type of life insurance policy that allows the policyholder to invest the policy's cash value in a range of investment options.

Diversification in portfolio management involves reducing the risk of investment by spreading investments over different asset classes.

Investing all your funds in one specific category of investment, increasing risk as all eggs are in one basket.

Diversification can reduce risk, but it doesn't eliminate risk altogether.

The investment portion of variable life insurance policies is separate from the death benefit, allowing for greater flexibility in investment choices.

The benefits provided by a variable life insurance policy are directly tied to the performance of the underlying investments.

Misrepresentation occurs when an insurance agent provides inaccurate or incomplete information about a policy, leading to a potential disadvantage for the policyholder.

Rebating involves an insurance agent offering a special incentive or reward to a potential policyholder in exchange for purchasing a policy.

Twisting is a form of misrepresentation where an insurance agent persuades a policyholder to switch to a different policy by providing incorrect or misleading information about their existing one.

Policyholders can easily adjust their premium payment amounts, modify the sum assured, and switch their investments between different funds within their variable life policy.

Customer understanding of the sales proposal is vital because the insurer does not guarantee any returns, and the policyholder bears the full risk of investment performance.

Twisting involves deceptive tactics to convince policyholders to switch policies, often by emphasizing the negatives of their current policy and minimizing the details of the new one.

An agent inducing a policyholder to discontinue their policy with another company without disclosing the potential downsides of doing so.

The higher the potential return, the higher the risk associated with the investment. It represents the relationship between risk and return in different investment options like cash funds, bonds funds, balanced funds, managed funds, and equity funds.

In a risk-return graph, equity funds typically occupy the top end, signifying their potential for high returns but also higher risk. At the bottom end, cash funds represent lower risk and lower potential returns.

The withdrawal value after a year is calculated based on the initial investment, growth rate, charges, and fees. The sum assured is determined by the higher value between 190% of the single premium or the value of the units.

Variable life policies' value reflects the market performance, offering flexibility and account-driven premiums and benefits. Endowment policies have a fixed structure with predetermined premiums and benefits established at the initial stage.

Variable life policies and endowment policies both directly affect the policyholders' benefits and risks.

A variable life insurance policy allows withdrawals with flexibility, either as a fixed amount by reducing the death benefit or by selling units, allowing for individual control over investment.

Variable life insurance policies provide an opportunity for greater returns but also carry the risk of lower returns due to equity investment, as opposed to traditional policies.

Variable life insurance policies have explicit charges like commissions and expenses that are variable, meaning they change depending on factors like policy value and management costs.

Variable life insurance funds provide a diversified portfolio of investments for policyholders, accessible through professional investment managers.

Variable life insurance policy premiums can be adjusted, allowing policyholders to control investment levels based on their finances.

Variable life insurance policies are often based on long-term investment, making them technically "whole life" policies, valid for the entire lifetime of the policyholder.

Single premium variable life insurance policies require a single upfront payment, offering flexibility with investment options.

Variable life insurance policies offer flexibility in adjusting the premium based on your financial situation, independent of investment choices.

A variable life fund doesn't guarantee a specific high yield, as returns depend on market performance.

The policy value in variable life insurance is calculated based on the current market value of the underlying investments, reflecting the fluctuating nature of the investment.

Variable life policies require a separate account for the invested funds, kept distinct from the insurance company's main assets.

To top-up a variable life policy, you make an additional premium payment. This allows you to buy more units of the variable life investment fund, increasing your potential returns.

Policy owners can choose to use top-up premiums to purchase additional units in the variable life fund, potentially increasing their investment exposure and potential returns.

The life company maintains a separate account for variable life policies, keeping the invested funds distinct from the general account used for traditional life insurance.

The policy value of an endowment policy is calculated by adding the cash value and accumulated dividends (if any), and then subtracting any outstanding loans at the time the policy is surrendered.

The offer price at the time of valuation determines the policy value of variable life policies. This price is determined by the market performance of the underlying investments.

A type of investment fund where investors purchase units representing ownership in a pool of assets managed by a trustee.

Equity funds invest in stocks, aiming for capital appreciation, with prices fluctuating based on market performance.

It's false to say that variable life insurance policies are directly linked to the life company's investment performance. They are indirectly linked, meaning the policyholder's chosen investment options impact the policy's value, not the life company's overall performance.

Policies that allow for extra payments to be made, increasing the policy's value or death benefit.

These policies provide flexibility for policyholders to adjust the level of coverage based on their needs.

A closed-end fund, meaning it does not need to sell assets to meet redemptions. It offers investors units representing a portfolio of assets managed by a trustee.

Variable life insurance allows policyholders to invest in different funds, such as bond funds, equity funds, property funds, specialized funds, and diversified funds.

During a market recession, equities are generally the last assets to depreciate, meaning they are usually more resilient during downturns than other asset classes.