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Variable Life Insurance Policies Quiz
37 Questions
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Variable Life Insurance Policies Quiz

Created by
@BelievableNickel3982

Questions and Answers

What options are correct regarding the statements about Variable Life policies?

  • II and III
  • I, II and III (correct)
  • I and II
  • I and III

    • Which statement about Single Premium Variable Life insurance policy is TRUE?

  • Has no death benefits.
  • Must be issued with a minimum death benefit. (correct)
  • Has no withdrawal value.
  • Must be issued with a maximum withdrawal value.

    • Which statement about the benefits in a Variable Life fund is FALSE?

  • The fund provides a highly diversified portfolio.
  • The fund enables small investors to have high yields.
  • The fund ensures definite high yield for an investor. (correct)
  • The fund relieves the investor from administering investments.

    • What are the flexibility benefits of investing in Variable Life funds?

    <p>Policyowners can easily change the level of premiums.</p> Signup and view all the answers

    Which are true regarding the characteristics of Variable Life policies?

    <p>Protection costs are met by implicit charges that vary with age.</p> Signup and view all the answers

    What is one of the fundamental differences between traditional participating life insurance policies and Variable Life insurance policies?

    <p>Variable Life policies have direct control over investments.</p> Signup and view all the answers

    Which of the following statements about Variable Life funds is NOT accurate?

    <p>They only focus on high-risk investments.</p> Signup and view all the answers

    Which flexibility feature is NOT available in Variable Life funds?

    <p>Guaranteed payment of premiums without options.</p> Signup and view all the answers

    Which statement about topping up under Variable Life insurance is FALSE?

    <p>Policyowners may buy 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

    Which characteristics of a Variable Life insurance policy are accurately described?

    <p>Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets.</p> Signup and view all the answers

    Which statements about Single Premium Variable Life policies are TRUE?

    <p>There is no fixed term in a single premium variable life policy, and therefore they are technically Whole life insurance.</p> Signup and view all the answers

    Which of the following statements about investing in bonds is NOT an advantage?

    <p>It is a safe investment that guarantees high returns regardless of market conditions.</p> Signup and view all the answers

    Which statements about variable life policies are TRUE?

    <p>The volatility of the returns depends on the investment strategy of the fund.</p> Signup and view all the answers

    Which of the following does NOT typically occur when a policyowner tops up a Variable Life insurance policy?

    <p>Policyholders receive immediate cash benefits from the top-up.</p> Signup and view all the answers

    What is a common misconception regarding the characteristics of Variable Life insurance?

    <p>The policy guarantees a return regardless of fund performance.</p> Signup and view all the answers

    Which of the following is NOT a typical feature of Variable Life insurance policies?

    <p>Policyholders are given a guaranteed income stream.</p> Signup and view all the answers

    What is the correct method for making withdrawals from a Variable Life insurance policy?

    <p>In terms of the number of units or fixed monetary amount through the cancellation of units.</p> Signup and view all the answers

    Which statement about the flexibility features of Variable Life policies is incorrect?

    <p>Loans can only be taken against the policy up to half of the withdrawal value.</p> Signup and view all the answers

    Which of the following statements accurately reflects the nature of investment returns in Variable Life insurance policies?

    <p>Investment returns can fluctuate based on market prices and are not guaranteed.</p> Signup and view all the answers

    Which statements about the policy value of Variable Life policies are accurate?

    <p>Endowment policy value includes cash value and accumulated dividends minus outstanding loans.</p> Signup and view all the answers

    Which of the following statements is incorrect regarding the terms associated with insurance policies?

    <p>Switching allows policyowners to change to any type of life insurance product.</p> Signup and view all the answers

    What is a key feature of Variable Life insurance that distinguishes it from traditional life insurance?

    <p>Policyowners have the ability to make investment choices.</p> Signup and view all the answers

    In the context of Variable Life insurance, which statement correctly describes loans against the policy?

    <p>Loans can be taken up to the full withdrawal amount.</p> Signup and view all the answers

    Which option best defines the concept of 'twisting' in insurance?

    <p>Misleading a client into replacing one policy with a less beneficial one.</p> Signup and view all the answers

    Which statement about higher return and risk is true?

    <p>Higher return comes with higher risk.</p> Signup and view all the answers

    What is the primary purpose of diversification in investment?

    <p>To reduce risks by spreading investments across various categories.</p> Signup and view all the answers

    Which of the following statements is true about equity funds?

    <p>Equity funds aim for capital appreciation through stock investments.</p> Signup and view all the answers

    Where do cash funds typically stand in terms of risk compared to equity funds?

    <p>Cash funds are relatively less risky than equity funds.</p> Signup and view all the answers

    What happens to equity funds during a market recession?

    <p>They are usually the last assets to depreciate.</p> Signup and view all the answers

    What is the correct withdrawal value after a year based on the given data?

    <p>P 420,069.02</p> Signup and view all the answers

    Which statement about the protection cost under a Variable Life insurance policy is correct?

    <p>It is generally covered by the cancellation of units in the fund.</p> Signup and view all the answers

    Which statement regarding diversification in portfolio management is FALSE?

    <p>Diversification can completely eliminate the risk of investing in stocks.</p> Signup and view all the answers

    What are the advantages of investing in preferred shares?

    <p>Rights to fixed dividends.</p> Signup and view all the answers

    Which of the following factors affects the allocation of dividends to policyowners in participating life insurance?

    <p>It is not linked to the life company’s investment performance.</p> Signup and view all the answers

    What does the bid-offer spread percentage indicate in insurance investments?

    <p>The difference between the buying and selling price of units.</p> Signup and view all the answers

    What is NOT typically an advantage of a diversified investment portfolio?

    <p>Increased chances of capital loss.</p> Signup and view all the answers

    Which of the following statements best describes the mortality charge in variable life policies?

    <p>It increases with the age of the policyowner.</p> Signup and view all the answers

    Study Notes

    Variable Life Insurance Key Concepts

    • Policyowners can buy additional units but are typically not allocated to new Variable Life insurance policies.
    • Top-up premiums are applied after deducting charges to purchase additional Variable Life fund units.
    • A top-up requires further single premium payments from the policyowner.
    • Policyowners are permitted to top-up at any time, subject to a minimum amount.

    Characteristics of Variable Life Policies

    • The withdrawal value depends on the investment performance of underlying assets.
    • Protection costs are primarily covered by implicit charges.
    • Commissions and company expenses are funded by various implicit charges, typically with a 6-month advance notice before any changes.
    • Withdrawal value generally equals the value of the units calculated at bid price.

    Single Premium Variable Life Policies

    • There is no fixed term, categorizing them similarly to whole life insurance.
    • Additional single premium injections (top-ups) are permissible.
    • Policyowners can adjust the level of coverage as needed.

    Advantages of Investing in Bonds

    • Bonds provide a guaranteed steady income and protect the principal.
    • They serve as a refuge during uncertain market conditions for investors.
    • Bonds focus on capital preservation but generally do not guarantee capital appreciation.

    Variable Life Policy Benefits

    • Withdrawal values are not guaranteed and are subject to market volatility.
    • Return variability is contingent on the fund's investment strategy.
    • Policyholders possess direct control over their variable life fund investments.

    Nature of Single Premium Variable Life Policies

    • A minimum death benefit is mandated upon issuance.
    • They offer withdrawal value, contrary to some misconceptions about the absence of benefits.

    Diversification in Variable Life Policies

    • Variable Life policies heavily involve equity investment compared to traditional policies.
    • Implicit charges cover protection costs, influenced by age and coverage level.
    • Explicit charges account for commissions and expenses, some of which vary.

    Misconceptions about Variable Life Funds

    • Diversified portfolios reduce investment risk but do not ensure high yields.
    • No definite high yield is guaranteed, as professional management varies.
    • Small investors benefit from accessible diversified portfolios they could not manage independently.

    Flexibility of Variable Life Funds

    • Policyowners can adjust insurance coverage and switch funds freely.
    • Options include premium holidays and additional single premiums.
    • Variable Life products feature a straightforward structure separating investment and insurance protection.

    Understanding Withdrawal and Flexibility Features

    • Withdrawals can be made either through unit cancellations or fixed monetary amounts.
    • Partial withdrawals can occur, with amounts drawn from policy values upon unit cashing.
    • Loans can be taken against the full withdrawal value of the policies.

    Nature of Investment Returns

    • Returns are not assured and depend on the fund's performance and market price fluctuations.
    • Investment returns can vary widely based on economic factors.

    Characteristics of Variable Life Policies

    • Valuation is determined at the offer price at assessment times.
    • Ensuring separate accounts for Variable Life policies is paramount.

    Investing in Preferred Shares

    • Preferred shares guarantee fixed dividends and precedence during asset dissolution but may not guarantee capital appreciation.

    Dividend Allocation in Traditional Policies

    • Dividend allocations are not inherently connected to a life company’s investment performance.
    • Higher returns usually correlate with greater risks.

    Diversification Strategy

    • Successful diversification mitigates risk by distributing investments across various asset classes.
    • Concentrated investments increase potential risk significantly.

    Investment in Variable Life Funds and Equity

    • Equity funds invest primarily in company shares, aiming for capital appreciation rather than stability.
    • The value of equity investments can be volatile, influenced by market conditions.

    Conclusion

    • Understanding these concepts can help policyholders make informed decisions about Variable Life Insurance and investment strategies.

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    Description

    Test your knowledge on Variable Life insurance policies with this comprehensive quiz. Explore statements about Single Premium Variable Life policies, benefits in Variable Life funds, and the flexibility of these investment options. This quiz covers fundamental differences between traditional participating life insurance and Variable Life insurance policies.

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