Variable Life Insurance - Mock Exam (Set D)

Variable Life Insurance - Mock Exam (Set D)

• Question 1: Variable life insurance policy withdrawals can be in terms of a specific unit number or a fixed monetary amount. The reduction of the life cover sum assured can also be based on units or fixed monetary amounts.

• Question 2: Policyholders' flexibility with withdrawals in variable life policies includes withdrawing partially, taking loans, and switching funds. The statement that withdrawal amount is met by cashing units at the bid price is TRUE. However, the flexibility of increasing or decreasing regular premium variable policies is also a TRUE feature.

• Question 3: Variable life insurance investment returns are not guaranteed and fluctuate with market prices. The returns are linked to the performance of the investment fund managed by the insurance company.

• Question 4: Variable life policy values are determined by the offer price at the time of valuation. Endowment policy values are the cash value plus accumulated dividends less outstanding loans. Variable life policies need a separate account distinct from the general account.

• Question 5: Rebating is an inducement to purchase; twisting is a form of misrepresentation, and misrepresentation is a specific type of twisting. Switching is a facility allowing policyholders to switch variable life funds within the company.

• Question 6: Offer price is used to determine the number of units in a variable life account. The margin between bid and offer prices covers management costs. The policy value is determined by the bid price of allocated units.

• Question 7: Fixed income securities are the most suitable investment for an investor prioritizing principal protection and a steady income stream.

• Question 8: Disadvantages of investing in common shares include: exposure to market and specific risks and potential worthlessness if the company becomes insolvent.

• Question 9: The policy values of variable life policies directly reflect the performance of the life company's fund. Endowment policies, conversely, are determined at the beginning of the policy and are not flexible. Endowment and variable policies both impact policyholders directly.

• Question 10: Twisting is a specific form of misrepresentation and describes an agent persuading a policyholder to switch companies without disclosing the disadvantages. Twisting includes misleading or incomplete comparisons, and is FALSE.

• Question 11: A variable life policy is suitable for a person with moderate risk tolerance and reasonable savings seeking substantial returns.

• Question 12: Benefits from investing in variable life funds include diversified portfolios, customizable premium payments, access to professional fund managers.

• Question 13: The liquidity ranking from least liquid to most liquid of short-term securities, property, cash, and equities is Cash, Short-term, Equities, and Property.

• Question 14: A unit trust is established by a trust deed to hold money and assets for an investor. It allows investors to buy units in the trust itself rather than shares in a company.

• Question 15: Variable life policies do not guarantee minimum sum assured or a level of insurance protection, premium usage is to buy units, and units are created and added to the fund.

• Question 16: Benefits of investment in variable life funds include diversified investment portfolios, flexible premium payment options, variable life funds managed by professionals with strong track records.

• Question 17: Variable policy benefits are closely tied to the investment performance of the underlying asset values.

• Question 18: It is important for the customer to understand the sales proposal fully as the variable life policy's impact from investment fluctuations is borne by the customer.

• Question 19: Rebating involves offering inducements for policies and enhances agent prestige; it's not a prohibited practice.

• Question 20: A variable life policy's value is determined and tied to the performance of the company's fund.

• Question 21: Top-ups may be added to policies; they don't have to cover the entire purchase amount initially.

• Question 22: Variable life insurance characteristics include the value/protection being dependent upon investment performance, costs are met by explicit charges, variable commissions/expenses.

• Question 23: Top-ups/single-premium injections and variable policy cover levels are factors of variable life policies.

• Question 24: Investing in bonds typically does not involve allowing the investor a change for capital appreciation.

• Question 25: Variable life policies have withdrawal values that are not guaranteed, volatility depends on fund strategy, and policyholders can control investments.

• Question 26: Single premium policies are typically issued with a minimum death benefit.

• Question 27: Variable policies usually have extended exposure to equity investment compared to traditional policies. Protection costs and policy expenses are usually outlined.

• Question 28: Variable life fund benefits include a diversified portfolio, professional management, and opportunities for diverse portfolio investment options.

• Question 29: Flexibility of variable funds includes switching between funds, premium holidays, and top-up facilities.

• Question 30: Differences between traditional and variable policies include variable policies typically having more choices for investment type versus traditional which is known as a fixed investment.

• Question 31: The switching facility is useful for policy owners to manage their financial plans efficiently.

• Question 32: Non-participating policies typically have lower surrender values that are not dependent on the policyholder's age. Traditional participating policies consider surrender values based on the paid up addition to date of surrender.

• Question 33: Policyholders buying life insurance with high equity investment should be aware of higher risk and potentially higher returns.

• Question 34: Withdrawal value will depend on the offer price, bid-price spread/fee, number of units, policy fee, admin/mortality fee, and topup fee.

• Question 35: Protection costs in variable policies are often met by explicit charges stipulated in the policy terms and can vary with age and coverage level.

• Question 36: Diversification does not entirely eliminate risk; it spreads it across different investment types and countries.

• Question 37: The benefits/advantages of preferred shares include fixed dividend payments, priority during dissolution, potential capital appreciation.

• Question 38: Dividend allotments in Traditional policies are not directly tied to investment performance unlike Variable life policies where the allocation may vary depending on the investment performance of the underlying assets.

• Question 39: Profitability in sales is achieved via freebies, extensive training/plans of the organization, and coordinated market analysis for sales objectives.

• Question 40: Cash investments may increase when the stock market is performing strongly, but decrease when interest rates are high.

• Question 41: Variable life insurance premium top-ups and holidays are usually permitted. The policies usually have life protection as a main component, though premium payments and withdrawal rates will vary.

• Question 42: People invest for guaranteed returns, a comfortable standard of living, higher education for children.

• Question 43: Variable life policies are used for investments, savings, and protection. Withdrawal value and protection benefits depend on investment performance.

• Question 44: Risk classifications associated with investments include risk of losing part/all initial investment and risk of return not matching investment expectations.

• Question 45: Trustees of unit trusts manage portfolios, ensure compliance with deeds, and overall protect unit holders.

• Question 46: Policy administration fees cover handling and other expenses associated with the policy.

• Question 47: Units are offered at the sale price determined by the investment company.

• Question 48: Diversification reduces investment risks by managing funds across multiple categories.

• Question 49: Variable fund investment is not directly restricted by the quantity of equities held, nor risk-prone.

• Question 50: Variable life policies often differ from participating policies by allowing premium alterations and facilitating more flexibility in premium payments.

• Question 51: Policyholder loss would depend on the bid-price, spread, premium, policy fee, and admin/mortality charges.

• Question 52: Variable life policies have values that fluctuate with investment performance and are not fixed premium policies.

• Question 53: Factors influencing investment risk include fraud by management and financial leverage.

• Question 54: Investing in bonds typically protects the principle value and provides guaranteed steady income.

• Question 55: Cash and deposits are generally viewed as the least risky investments, followed by diversified investment portfolios, and then stocks and options.

• Question 56: Higher returns are often associated with higher risk.

• Question 57: Variable policy values typically are based on the offer pricing and endowment policies on their cash values plus accumulated dividends. Variable policies require distinctive accounts. Policyholder losses generally depend on the bids, fees, and premium values.

• Question 58: Policyholders must be given the net withdrawal value, premium received, and basis of asset valuations, as well as previous and current asset holdings.