Variable Life Insurance Overview
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Variable Life Insurance policy owners may make withdrawals in terms of:

  • Number of units or fixed monetary amount through cancellation of units
  • Number of units through cancellation of units (correct)
  • Number of units fixed monetary through reduction of the life cover sum assured
  • Fixed monetary amount only through reduction of the life cover sum assured
  • Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at the bid price.

    True

    Policyholders can take loans against their variable life up to the entire withdrawal value of their policies.

    False

    Policyholders have the flexibility of increasing or decreasing their premiums for regular premium variable life policies.

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

    The investment returns under life insurance policy:

    <p>Are not guaranteed</p> Signup and view all the answers

    The policy value of variable life policies is determined by the offer price at the time of valuation.

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

    The policy value of endowment policies is the cash value plus any accumulated dividends less any outstanding loans due at the time of the surrender.

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

    The life company needs to maintain a separate account for variable life policies distinct from the general account.

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

    Rebating is to offer a prospect a special inducement to purchase a policy.

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

    Twisting is a specific form of misrepresentation.

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

    Misrepresentation is a specific from of twisting.

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

    Switching is a facility allowing the policyholders to switch to another variable life funds offered by the company.

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

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

    <p>The margin between the bid and offer price is used to cover the management costs of the policy</p> Signup and view all the answers

    What is the most suitable investment 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?

    <p>Shares can become worthless if company becomes insolvent</p> Signup and view all the answers

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

    <p>The benefits and risks of variable life and endowment policies directly accrue to the policyholders</p> Signup and view all the answers

    What are the benefits available when investing in variable life funds?

    <p>The variable life funds offer policyholders an access to pooled or diversified portfolios.</p> Signup and view all the answers

    Rank the following in terms of their liquidity, from the least liquid to the most liquid

    <p>Property, Equities, Short term securities, Cash</p> Signup and view all the answers

    Established by a trust deed which enables a trustee to hold the pool of money and assets in trust in behalf of the investor.

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

    There is no guaranteed minimum sum assured for the purpose of declaring dividends.

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

    There is no guaranteed minimum sum assured as a level of life insurance protection.

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

    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.

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

    Purchase of the units can only be made from the variable life fund itself, which will then create new units and add investment monies to the value of the fund.

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

    The benefits of investing in variable life funds include:

    <p>Policy owners can gain access to variable life funds managed by professional investment managers with proven track records.</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 condition on variable life policy is borne solely by the customer</p> Signup and view all the answers

    Rebating is prohibited under the Insurance Code.

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

    Which of the following statements about rebating are TRUE?

    <p>Rebating is prohibited under the Insurance Code</p> Signup and view all the answers

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

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

    Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholder as cash dividends.

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

    Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date.

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

    The investment element of Variable life policies varies according to underlying assets of the portfolio.

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

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

    <p>Policy owners may be 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 include

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

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

    <p>Top-ups are single premium injections are allowed in these plans</p> Signup and view all the answers

    Investing in bonds offer the following EXCEPT

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

    Single premium variable life insurance policy:

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

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

    <p>Variable policies generally have a longer exposure to equity investment than with participating and other traditional policies</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 an investor since it is managed by professionals who are well-versed in the management of risk of investment portfolios.</p> Signup and view all the answers

    Policy owners can easily change the level of sum assured and switch their investment between funds.

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

    The flexibility benefit of investing in variable life funds include

    <p>Policy owners can easily take premium holidays and add single premium to top-ups</p> Signup and view all the answers

    The fundamental differences between traditional participating life insurance policies and variable life insurance policies include

    <p>The investment elements of variable life insurance policies is made known to the policy owner at the outset and is invested in a separate identifiable fund which is made up of units of investment.</p> Signup and view all the answers

    The switching facility under variable life insurance policies is a very useful ______.

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

    Cash value is paid when yearly renewable term insurance policy is surrendered.

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

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

    Study Notes

    Variable Life Insurance Policy Summaries

    • Variable life insurance policyholders can withdraw funds in terms of units or a fixed amount, but this does not affect the death benefit.
    • Policyholders have flexibility to switch funds and adjust premiums.
    • Investment returns are not guaranteed and fluctuate based on market performance.
    • Policy value is determined by the unit price at valuation, not offer price.
    • Endowment policy value is cash value, plus dividends, minus outstanding loans.
    • Variable life policies use a separate account from general accounts.

    Flexibility Features of Variable Life Policies

    • Policyholders can request partial withdrawals based on the current bid price of the funds.
    • Policyholders cannot borrow from a VUL (Variable Universal Life) policy.
    • Policyholders can switch funds, but the company must allow this.
    • Policyholders can increase or decrease premium amounts on variable life policies.

    Investment Returns in Life Insurance

    • Investment returns on life insurance policies are not guaranteed.
    • Returns are linked to performance of investment funds managed by the company.
    • Investment returns fluctuate based on market conditions.

    True/False Statements

    • Variable life policy value is determined by the offer price. FALSE (It's unit price)
    • Endowment policy value is cash value plus dividends minus outstanding debts. TRUE
    • Separate account for variable life policies is needed. TRUE

    Definitions of Terms

    • Rebating: Offering incentives to potential policyholders. TRUE
    • Twisting: Misrepresenting or misleading a policyholder, generally illegal. TRUE
    • Misrepresentation: A broader term including twisting, rebating. FALSE (Twisting is a type of misrepresentation)
    • Switching: Allowing policyholders to move between funds. TRUE

    Variable Life Policies vs. Endowment Policies

    • Variable life policy values reflect fund performance. TRUE
    • Endowment premiums and benefits are fixed at the start of the policy. FALSE (Variable life premiums are flexible)
    • Benefits and risks directly accrue to the policyholders for both policies. FALSE (Companies also have risks)

    Investment Recommendations

    • For a 35-year-old with moderate risk tolerance and savings, a participating endowment or annuity policy may be recommended.

    Liquidity Ranking

    • Cash (most liquid)
    • Equities (stocks)
    • Property (least liquid)
    • Short-term securities

    Unit Trust Characteristics

    • A unit trust is established by a trust deed, enabling a trustee to hold funds for investors.

    Variable Life Insurance Policy Benefits

    • Policy owners can access pooled, diversified investment portfolios. TRUE
    • Policyholders can vary premium payments, take holidays, add single premiums, and change sum assured. TRUE
    • Policyholders can access professional fund managers. FALSE (Usually, they have access to the funds, not managers directly)

    Investment Objectives

    • People invest for higher education, comfortable living, and fixed deposits for guaranteed returns.
    • Types of investments include: Cash, bonds, stocks, and options.

    Risk in Investment

    • Risk of investment involves the possibility of partially or fully losing initial investment
    • Risk includes rate of return not meeting expectation

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    Description

    Explore the key features of variable life insurance policies, including flexibility in withdrawals and premium adjustments. Learn how investment returns are influenced by market performance and understand the structure of these policies in relation to their cash values.

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