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Questions and Answers
Variable Life Insurance policy owners may make withdrawals in terms of:
Variable Life Insurance policy owners may make withdrawals in terms of:
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.
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.
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.
Policyholders have the flexibility of increasing or decreasing their premiums for regular premium variable life policies.
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The investment returns under life insurance policy:
The investment returns under life insurance policy:
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The policy value of variable life policies is determined by the offer price at the time of valuation.
The policy value of variable life policies is determined by the offer price at the time of valuation.
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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.
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.
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The life company needs to maintain a separate account for variable life policies distinct from the general account.
The life company needs to maintain a separate account for variable life policies distinct from the general account.
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Rebating is to offer a prospect a special inducement to purchase a policy.
Rebating is to offer a prospect a special inducement to purchase a policy.
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Twisting is a specific form of misrepresentation.
Twisting is a specific form of misrepresentation.
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Misrepresentation is a specific from of twisting.
Misrepresentation is a specific from of twisting.
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Switching is a facility allowing the policyholders to switch to another variable life funds offered by the company.
Switching is a facility allowing the policyholders to switch to another variable life funds offered by the company.
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Which of the following statements about variable life policies is TRUE?
Which of the following statements about variable life policies is TRUE?
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What is the most suitable investment for an investor who is interested in protecting his principal and receiving a steady stream of income?
What is the most suitable investment for an investor who is interested in protecting his principal and receiving a steady stream of income?
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What are the disadvantages of investing in common shares?
What are the disadvantages of investing in common shares?
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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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What are the benefits available when investing in variable life funds?
What are the benefits available when investing in variable life funds?
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Rank the following in terms of their liquidity, from the least liquid to the most liquid
Rank the following in terms of their liquidity, from the least liquid to the most liquid
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Established by a trust deed which enables a trustee to hold the pool of money and assets in trust in behalf of the investor.
Established by a trust deed which enables a trustee to hold the pool of money and assets in trust in behalf of the investor.
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There is no guaranteed minimum sum assured for the purpose of declaring dividends.
There is no guaranteed minimum sum assured for the purpose of declaring dividends.
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There is no guaranteed minimum sum assured as a level of life insurance protection.
There is no guaranteed minimum sum assured as a level of life insurance protection.
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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.
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.
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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.
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.
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The benefits of investing in variable life funds include:
The benefits of investing in variable life funds include:
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Which of the following BEST describes the policy benefits of variable life policies?
Which of the following BEST describes the policy benefits of variable life policies?
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Why is it important that the customer must understand the sales proposal in full?
Why is it important that the customer must understand the sales proposal in full?
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Rebating is prohibited under the Insurance Code.
Rebating is prohibited under the Insurance Code.
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Which of the following statements about rebating are TRUE?
Which of the following statements about rebating are TRUE?
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Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company.
Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company.
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Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholder as cash dividends.
Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholder as cash dividends.
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Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date.
Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date.
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The investment element of Variable life policies varies according to underlying assets of the portfolio.
The investment element of Variable life policies varies according to underlying assets of the portfolio.
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Which of the following statements about option top -up under variable life insurance is false?
Which of the following statements about option top -up under variable life insurance is false?
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The characteristics of a variable life insurance include
The characteristics of a variable life insurance include
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Which of the following statements about single premium variable life policies are TRUE?
Which of the following statements about single premium variable life policies are TRUE?
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Investing in bonds offer the following EXCEPT
Investing in bonds offer the following EXCEPT
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Single premium variable life insurance policy:
Single premium variable life insurance policy:
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Which of the following statements about characteristics of variable life policies are TRUE?
Which of the following statements about characteristics of variable life policies are TRUE?
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Which of the following statements about benefits in variable life fund is FALSE?
Which of the following statements about benefits in variable life fund is FALSE?
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Policy owners can easily change the level of sum assured and switch their investment between funds.
Policy owners can easily change the level of sum assured and switch their investment between funds.
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The flexibility benefit of investing in variable life funds include
The flexibility benefit of investing in variable life funds include
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The fundamental differences between traditional participating life insurance policies and variable life insurance policies include
The fundamental differences between traditional participating life insurance policies and variable life insurance policies include
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The switching facility under variable life insurance policies is a very useful ______.
The switching facility under variable life insurance policies is a very useful ______.
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Cash value is paid when yearly renewable term insurance policy is surrendered.
Cash value is paid when yearly renewable term insurance policy is surrendered.
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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.
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.
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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.