Insurance Commission VUL Reviewer PDF

Insurance Commission Reviewer Insurance Commission VUL Reviewer Direction: Choose the best answer. Write the CAPITAL LETTER of your answer on the answer sheet provided 1. Which of t...

Insurance Commission Reviewer Insurance Commission VUL Reviewer Direction: Choose the best answer. Write the CAPITAL LETTER of your answer on the answer sheet provided 1. Which of the following statements about option to top-up under variable life insurance products is FALSE? a. To top-up a policy, the policyowner pays further single premium at the time of top-up. b. Policyowner may buy additional units in the variable life fund and these units will be allocated to new variable life insurance policies. c. Further premiums at time of top-up will be used in full, after deducting charges for top- ups, to purchase additional units of the variable life funds. d. Policyowners are normally allowed to top-up their policies at any time, subject to a minimum amount 2. What are the disadvantages when investing in common shares? I. Dividends are paid not more than fixed rates. II. Investors are exposed to market and specific risks. III. Shares can become worthless if company becomes insolvent. a. I, and II b. I, and III c. II, and III d. I, III, and III 3. Which of the following statements about the flexibility features of variable life policies is FALSE? a. Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at bid price. b. Policyholders can take loans against their variable life policies up to the entire withdrawal value of their policies. c. Policyholders have the flexibility of switching from one fund to another, provided it satisfies the company’s switching criteria. d. Policyholders have the flexibility of increasing or decreasing their premiums for regular premiums variable life policies. VUL IC Reviewer v.1.6 14 June 2024 Page 1  Insurance Commission Reviewer 4. What is the most suitable investment instrument for someone who is interested in protecting his principal, while receiving a steady stream of income? a. Equities b. Warrants c. Variable Life Policies d. Fixed Income Securities 5. The switching facility under variable life insurance policies is very useful _____. a. For the purpose of profit planning by the life policies b. For the purpose of assets planning by the trustee c. For the purpose of financial planning by the policy owners d. For the purpose of sales planning by fund managers 6. A unit trust is ____. a. Established by a trust deed, which enables a trustee to hold the pool of money and assets in trust on behalf of the investor. b. A close-end fund, and does not have to dispose of its assets if a large number of investors sell their shares. c. One whereby an investor buys units in the trust itself and not shares in the company. d. An organization registered under the Securities and Exchange Commission (SEC) which usually invests in a wide range of equities and other investments. 7. The following are characteristics of a variable life insurance policy I. Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets. II. Its protection costs are generally met by implicit charges. III. Its commissions and company expenses are met by a variety of explicit charges, notice of which is given by life companies normally 6 months prior to any change in such charges. IV. Its withdrawal value is normally the value of units allocated to the policyholder calculated at the bid price a. I, II and IV b. II, III and IV c. I, II and III d. I, III and IV 8. Which of the following statements are TRUE? I. The policy value of variable life policies is determined by the offer price at the time of valuation. II. The policy value of endowment policies is the cash values plus any accumulated dividends less any outstanding loans due at time of surrender. III. The life company needs to maintain a separate account for variable life policies distinct from the general account. VUL IC Reviewer v.1.6 14 June 2024 Page 2  Insurance Commission Reviewer a. II and III b. I, II, and III c. I and III d. I 9. Variable life insurance policy owners may withdraw in terms of ____. a. Number of units or fixed monetary amount through cancellation of units. b. Number of units or fixed monetary amount though reduction of the life cover sum assured. c. Fixed monetary amount only through reduction of the life cover sum assured. d. Number of units through cancellation of units. 10. Which of the following statements are fixed income securities? I. Corporate Stocks II. Government Bonds III. Preferred Shares IV. Money Market Instruments V. Properties a. I, II, III, and IV b. I and III c. I, II, and V d. All of the above 11. Which of the following investment options entitle the holder ownership and share of profits in the form of dividend appreciation? a. Cash b. Bonds c. Futures d. Ordinary Shares 12. Factors to consider in buying Properties: I. Quality of land II. The location of land III. The value of building on land IV. The investment V. Place of work a. I, II, and III b. II, III, and IV c. I, III, and V d. All of the above VUL IC Reviewer v.1.6 14 June 2024 Page 3  Insurance Commission Reviewer 13. What are the types of real estate investment? I. Rural Property II. Domestic Property III. Agricultural Property IV. Commercial/Industrial Property V. Foreign Property a. I, II, and III b. II, III, and IV c. I, III, and V d. All of the above 14. The difference between the offer price and the bid price is: a. Bid-offer spread b. Offer price spread c. Bid price spread d. None of the above 15. Which of the following information must NOT be conveyed to the client in the sale of Variable Life insurance policies? a. Rate of return b. Time horizon of the product c. Benefits illustrations using the 10% as the gross d. Guaranteed interest rate 16. The disadvantage of fixed income securities include: I. The coupon rate is fixed and cannot respond to inflation. II. The investors are exposed to market specific risks. III. Fluctuations in bond prices may lead to capital losses. a. II and III b. I and II c. I, II, and III d. I and III 17. The amount of risk a person can take depends on: I. Age II. Investment Objectives III. Financial conditions IV. Personality a. I and II b. II, III, and IV c. None of the above d. All of the above VUL IC Reviewer v.1.6 14 June 2024 Page 4  Insurance Commission Reviewer 18. An investor in variable life funds gets to enjoy these benefits: I. Policy owners have access to pooled or diversified portfolios of investment. II. Policy owners can easily change the level of the premium payments as the product design of variable life insurance policies have clear structures which cater separately for investment and insurance protection. III. Policy owners can gain access to variable life funds managed by professional investment managers with proven track records. IV. Policy owners can buy a variable life insurance policy only with a high initial investment. a. I, II, and IV b. I, III, and IV c. I, II, and III d. II, III, and IV 19. Which of the following statements about rebating is/are TRUE ? I. Rebating is prohibited under the Insurance Code. II. Rebating deals with offering the prospect a special inducement to purchase a policy. III. Rebating will enhance the sales performance and uphold the prestige of an agent. a. I and II b. I and III c. II and III d. III 20. Which of the following statements are FALSE? I. Higher capital gain is normally associated with lower risk. II. One way to lower risk in investment is to diversify. III. One method of measuring risk is to determine the average return and its standard deviation from future data. IV. Diversification can be achieved by investing in different countries and/or types of assets. V. An investor can always choose an investment that is risk free. a. I, II, and III b. II, III, and IV c. I, III, and V d. All of the above 21. Which of the following statements is FALSE? a. Variable life insurance policies offer investors plans with values that are indirectly linked to the investment performance of the life company. b. A life insurance company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholders as cash dividends. c. Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date. d. The investment element of variable life policies varies according to underlying assets of portfolio. VUL IC Reviewer v.1.6 14 June 2024 Page 5  Insurance Commission Reviewer 22. Which of the following statements about single premium variable life policy are TRUE? I. There is no fixed term in a single premium variable life policy, and therefore, they are technically whole life insurance. II. Top-up single premium injections are allowed in these plans. III. Policyholders have the flexibility of varying the life coverage. a. I, II, and III b. II and III c. I and II d. I and III 23. Which of the following are types of corporate stocks? I. Debenture stocks II. Government stocks III. Loan stocks IV. Money Market Instruments V. Convertible stocks a. I, II, and III b. I, II, III, and IV c. I, III, and V d. All of the above 24. Which of the following statements about variable life policies is/are TRUE? I. The cash withdrawal value is not guaranteed. II. The volatility of the returns depends on the investment strategy of the fund. III. The variable life policyholder has direct control over the investment decisions of the variable life fund. a. I, II, and III b. I and II c. I and III d. II and III 25. Which of the following statements about variable life policies are TRUE? I. Variable life policies generally have larger exposure to equity investment than with participating and other traditional policies. II. The protection costs are generally met by implicit charges, which vary with age and level of cover. III. Commissions and company expenses are met by a variety of explicit charges, some of which are variable. a. I, II, and III b. I and II c. II and III d. I and III VUL IC Reviewer v.1.6 14 June 2024 Page 6  Insurance Commission Reviewer 26. The facility to do switching under a variable life insurance policy is a very useful ____. a. For the purpose of profit planning by the life policies b. For the purpose of assets planning by the trustee c. For the purpose of sales planning by the fund managers d. For the purpose of financial planning by the policy owners 27. Which of the following is/are TRUE about the flexibility benefit of investing in variable life funds? I. Policy owners can easily change the level of sum assured and switch their investment between funds. II. Policy owners can easily take premium holidays and add single premium to top-ups. III. Variable life insurance products have a single product design with a clear structure which cater separately for investment and insurance protection. IV. Policy owners can easily change the level of their premium payment. a. All of the above b. I, II, and III c. I, II, and IV d. I, III, and IV 28. Which of the following statements about risks of investing in variable life funds is TRUE? a. Investment in variable life funds which are fully invested in units of equity is not suitable for policyowners who can tolerate the risks of short term fluctuations in their account value. b. Policyowners who are risk averse should buy variable life insurance policies with high equity investment. c. Policyowners who are risk averse should not purchase life insurance policies with high protection and guaranteed cash and maturity values d. Policyowners who invest in variable life funds with high equity investment face greater risk, but can expect to achieve higher return than the traditional life insurance product over the long term. 29. What would be the withdrawal value after a year? Offer price = Ps 16.00 Bid-offer spread = 4.5% Number of Units bought = 25,000 units Policy Fee = Ps. 1,800 Admin and Mortality Charge = Ps. 8,750 Top-Up Fee = Ps. 700 Admin for Top-Up = Ps. 2,000 Sum assured is 190% of single premium of the value of the units, whichever is higher. Assumptions: 1. Charges and fees are deducted after the single premium has been invested into the account. VUL IC Reviewer v.1.6 14 June 2024 Page 7  Insurance Commission Reviewer 2. The growth rate of the unit price and the bid-offer spread is maintained at 8% and 4.5% respectively. a. Ps. 432,000.00 b. Ps. 420,069.02 c. Ps. 401,107.58 d. Ps. 412,500.00 30. Which of the following statements about an investor diversifying his portfolio is FALSE? a. A diversified portfolio provides greater security to an investor having to sacrifice the return for the portfolio. b. A diversified portfolio can completely eliminate the risk of investing the stocks in a portfolio. c. A diversified portfolio can involve purchasing different types of stocks and investing in stocks of different countries. 31. In Traditional Participating Life insurance products, the allocations to policy owners in the form of dividends ____. I. Are not directly linked to the life company’s investment performance II. Have already been smoothened by the life company III. Do not have the highs and lows of investment returns as in good investment years of the life company IV. Are not fixed at the inception of the policy, but are greatly dependent on the investment performance of the life company. a. I and II only b. I, II, and III c. I, II, and IV d. II, III, and IV 32. Which of the following statements is TRUE about cash? a. It has high yield potential. b. Amount invested in cash depends on the size of the cash flow requirement. c. Investment in cash increases when there is a bull run in the stock market. d. Investment in cash decreases when interest rates rise. 33. Which of the following are main characteristics of variable life policies? I. The policies can be used for investment, as a source of regular savings and protection. II. The withdrawal values and protection benefits are determined by the investment performance of the underlying assets. III. The net cash values of the policies are the gross cash values shown in the policy that includes dividends up to the date of surrender, less any indebtedness including interest. a. II b. I c. I, II, and III VUL IC Reviewer v.1.6 14 June 2024 Page 8  Insurance Commission Reviewer d. I and II 34. The duties of the trustee of unit investment trust do not include a. Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself b. Ensuring that the fund manager adhere to the provision of trusts deeds c. Acting generally to protect the unit-holders d. Holding the pool of money and assets in trust in behalf of the investors 35. The policy fee payable by a variable life insurance policy owner is to cover ____. a. The handling charges by professional investment managers b. The prices for each unit bought under the variable life insurance policy c. The mortality costs of the variable life insurance policy d. The administrative expenses of setting up the variable life insurance policy 36. In risk-return profile of bond funds, cash funds, managed funds, balanced funds, and equity funds, a risk-return graph will show that ____. I. Higher return normally comes with lower risk. II. Higher return normally comes with higher risk. III. At the top end of the graph are the equity funds. IV. The relatively risk-less cash funds sit at the bottom end of the graph. a. I, II, and III b. II, III, and IV c. I, II, and IV d. I, III, and IV 37. Variable life funds can be invested in any financial instruments including bond funds, property funds, specialized funds, and equity funds. Equity funds ____. a. Invest in shares of stocks and the magnitude of the change in unit prices will only depend on the quantity of the equities held b. Invest in shares of stocks and during market recession, such assets are usually the last to depreciate c. Invest in share of stocks which are inherently of lower risk in nature and the prices of stocks are stable d. Invest in share of stocks and investor who buys such assets usually aims for capital appreciation 38. The investment returns under variable life insurance _____. I. Are not guaranteed II. Are assured III. Are linked to the performance of the investment fund managed by the life company IV. Fluctuate according to the rise and fall of the market prices VUL IC Reviewer v.1.6 14 June 2024 Page 9  Insurance Commission Reviewer a. I, II, and III b. I, II, and IV c. I, III, and IV d. II, III, and IV 39. Which of the following statements is FALSE? a. Rebating is to offer a prospect a special inducement to purchase a policy. b. Twisting is a specific form of misrepresentation. c. Misrepresentation is a specific form of twisting. d. Switching is a facility allowing policyholder to switch to another variable life funds offered by the company. 40.Which of the following statements about the differences between variable life policies and endowment policies are FALSE? I. The policy values of variable life and endowment policies directly reflect the performance of the fund of the life company. II. The premiums and benefits of the endowment policies are described at inception of the policy whereas variable life policies are flexible as they are account-driven. III. The benefits and risks variable life and endowment policies directly accrue to the policyholders. a. I and II b. I, II, and III c. I and III d. II and III 41. Which of the following statements about variable life policies are TRUE? I. Offer price is used to determine the numbers of units to be cancelled to the account. II. The margin between the bid and offer price is used to cover the management cost of the policy. III. The policy value is calculated based on the bid price of units allocated into the policy. a. I, II, and III b. I and II c. I and III d. II and III 42. Mr. Cruz is currently earning Ps 30,000 each month. He is 35 years old and has a reasonable amount of savings. He has a moderate level for risk tolerance. What kind of policy would you recommend him to buy? a. Participating endowment b. Variable life policies c. Participating whole life d. Annuities VUL IC Reviewer v.1.6 14 June 2024 Page 10  Insurance Commission Reviewer 43. Which of the following statements are FALSE? I. The bid-offer spread is used to provide a death benefit for the Variable Life insurance policy. II. The bid price is always higher than the offer price. III. The bid-offer spread is usually about 5%. IV. There are two types of death benefits under the Variable Life insurance product. They may offer either or both types depending on its product design and on the discretion of the policyowner. a. I and II b. II and III c. All of the above d. None of the above 44. Which of the following statements about twisting is FALSE? a. Twisting is a special form of misrepresentation. b. It refers to an agent inducing a policyholder to discontinue a policy with another company without disclosing the disadvantage of doing so. c. It includes misleading or incomplete comparison of policies. d. It refers to an agent offering a prospect a special inducement to purchase a policy. 45. If the current offer price is Php 2.50, and the bid-offer spread is 4%, what is the bid price? a. Php 2.40 b. Php 2.50 c. Php 2.60 d. Php 3.70 46. Rank the following in terms of liquidity, from the least liquid to the most liquid: I. Short Term Securities II. Property III. Cash IV. Equities a. IV, I, III, I b. III, I, IV, II c. II, I, IV, III d. II, IV, I, III 47. Which of the following best describes the benefits of variable life policies? a. The policy benefits are payable only on death or disability. b. The policy benefits will depend on the long-term performance of the life company. c. The policy benefits are directly linked to the investment performance of the underlying assets. d. The policy benefits are guaranteed. VUL IC Reviewer v.1.6 14 June 2024 Page 11  Insurance Commission Reviewer 48. Investing in bonds offers the following advantages EXCEPT : a. It allows the investor a chance for capital preservation b. It is a place of temporary refuge when the investor foresees that the market outlook is uncertain c. It enables the investor an opportunity for capital appreciation d. It offers protection to the principal and a guaranteed steady stream of income 49. Which of the following statements about benefits in a variable life fund is FALSE? a. The fund provides a highly diversified portfolio, thus, lowering the risk of investment. b. The fund ensures definite high yield for the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios. c. The fund relieves investor from the hassle of administering his/her investment. d. The fund enable small investor to participate in a pool of diversified portfolio in which he/she with low investment capital is likely to have acceded to. 50. The differences between traditional participating life insurance and variable life insurance include: I. Variable life insurance policies are less likely to offer more choices in terms of the type of investment funds. II. The investment elements of variable life insurance policies are made known to the policy owner at the outset and is invested in a separately identifiable fund which is made up units of investment. III. Variable life insurance policies offer the potential for higher returns. IV. Traditional participating policies aim to produce a steady return by smoothing out market fluctuation. a. I, III, and IV b. II, III, and IV c. I, II, and III d. I, II, and IV 51. Advantages of investing in preferred shares are: I. It gives shareholders the right to a fixed dividend. II. Has the priority over company assets during dissolution. III. They enjoy benefit of capital appreciation. a. I, II, and III b. I and II c. I and III d. II and III 52. Under regular premium, variable whole life insurance plan: I. Premium top-ups and holidays, subject to the life company’s administrative rules are usually allowed II. Life protection is the main objective of the plan with investment as a nominal purpose. III. Withdrawals after the payment of a few years premium are usually allowed. VUL IC Reviewer v.1.6 14 June 2024 Page 12  Insurance Commission Reviewer IV. A single premium contribution is made to the policy which uses the premium to purchase units in variable life fund and to provide certain level of life cover. a. II, III, and IV b. I, III, and IV c. I, II, and IV d. I, II, and III 53. Risk can be classified into two particular categories in relation to investment. They include__________ I. The risk of not losing some or all of a person’s initial investment II. The risk of rate of return on the investment not matching up to the individual’s expectation III. The risk of rate of return on the investment matching up to the individual’s expectation IV. The risk of losing some or all of a person’s initial investment a. I and III b. I and II c. III and IV d. II and IV 54. The selling price under a variable life insurance policy is ___. a. The price at which units the policy are bought back by the life company b. The price at which units under the policy are offered for sale by the life company c. Also known as the bid price d. A fixed amount throughout 55. Which statement regarding the risk of investment in Variable Life is TRUE: a. Policyowners who are risk averse should not purchase a life insurance policy with high protection and guaranteed cash and maturity values. b. Investments in Variable Life funds which are fully invested in units of equity funds are not suitable for policyowners who can tolerate the risks of short-term fluctuation in their cash values. c. Policyowners who invest in Variable Life funds with high equity investment face greater risk but can expect to achieve higher return that Traditional Life insurance policies with high equity investment. d. Policyowners who are risk averse should buy Variable Life policies with high equity investment. VUL IC Reviewer v.1.6 14 June 2024 Page 13  Insurance Commission Reviewer 56. What are the disadvantages of investing in cash and deposits? I. There is reinvestment risk. II. They provide the lowest return. III. It is the safest type of investment. a. I b. I and II c. II and III d. All of the above 57. When investing in variable life funds, what are the benefits available? I. The variable life funds offer policyholders an access to pooled or diversified portfolios. II. The variable life policyholder can vary his premium payments, take premium holidays, add single premium top-ups, and change the level of sum assured easily. III. The variable life policyholder can have access to the services of a pool of qualified and trained professional fund managers a. I and II b. I and III c. I, II, and III d. II and III 58. Under variable life insurance policies, ____. I. There is no guaranteed minimum sum assured for the purpose of declaring dividends II. There is no guaranteed minimum sum assured as a level of life insurance protection III. Each of the policyowner’s premium will be used to purchase units, the number of which is dependent on the selling price of each unit IV. Purchase of units can only be made from the variable life fund itself, which will then create new units and the investment will add value to the fund a. I, II and III b. I, II and IV c. II and IV d. III and IV 59. Why is it important that the customer has to understand the sales proposal in full? a. Because the insurer does not guarantee any return b. Because the impact of changes in investment condition on variable life policy borne solely by the customer c. Because the agent may give the wrong recommendations d. Because the policyholders expects higher returns VUL IC Reviewer v.1.6 14 June 2024 Page 14  Insurance Commission Reviewer 60.A single premium variable life insurance policy ____. a. Has no withdrawal value b. Must be issued with a maximum withdrawal value c. Has no death benefit d. Must be issued with a minimum death benefit 61. Which of the following statements about surrender value under traditional participating life insurance products is TRUE? a. When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with number of units b. Cash value is paid when a yearly renewable term insurance policy is surrendered c. 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 d. Policyholders who are risk averse should purchase life insurance policies with high protection and guaranteed cash and maturity values 62. Under a variable life insurance policy, the protection costs ____. I. Are met by a flat initial charges for regular premium loans II. Are generally covered by cancellation of units in the fund III. Are generally met by explicit charges stipulated openly in the policy terms IV. Vary with age of policy owner and level of coverage a. I, II, and III b. I, II, and IV c. I, III, and IV d. II, III, and IV 63. Term insurance ____. a. Provides for payment of the sum insured when the life insured survives a specific period b. Provides protection for a specific period and has no savings element c. Is the most complex and expensive of all life insurance products d. Provides for surrender of cash values on early termination of the insurance 64. The objective of satisfying customers’ need and business profitability can be achieved by an agent through ______ I. The giving of freebies to customers II. Extensive investment training by the company III. The use of sales plan, where sales goals, strategic and objectives are coordinated with market analysis, segmentation and targeting IV. The giving of monetary assistance and discount to the customers a. I and III b. II and III c. I, II, and IV d. II, III, and IV VUL IC Reviewer v.1.6 14 June 2024 Page 15  Insurance Commission Reviewer 65. These statements are true EXCEPT: a. No regular income may be gained from investing in commodities. b. People invest money to provide funds for the higher education of their children. c. Investing in fixed deposits gives high guaranteed returns. d. People invest money to enhance a comfortable standard of living. 66. Which of the following statements about investment objectives is FALSE? a. People invest money in fixed deposits to produce high and guaranteed returns. b. People invest money to enhance a comfortable standard living. c. People invest money to provide funds for higher education for their children. d. Investment in commodities has no regular income. 67. Which of the following funds is comprised of a higher proportion of equity and a lower proportion of fixed-income instruments? a. Bond Funds b. Managed Funds c. Cash Funds d. Mixed Funds 68. Diversification in investment involves ___. a. Putting all the funds under management into one category of investment b. Spreading the risks of investment by not putting the fund into several categories investment c. Reducing the risks of investment by putting one fund under management into several categories of investment d. Reducing the risks of investment by putting all one’s eggs in one basket 69. Which of the following statements about diversification in portfolio management is FALSE? a. Diversification helps to spread the portfolio risk by investing in different categories of investment in a portfolio. b. Diversification can completely eliminate risk of investing in stocks in a portfolio. c. A diversified portfolio provides greater security to an investor without sacrificing the returns of the portfolio. d. Diversification can involve purchasing different types of stocks and investing in stocks of different countries. VUL IC Reviewer v.1.6 14 June 2024 Page 16  Insurance Commission Reviewer 70. People generally invest their money to provide: I. An improvement in their financial position II. A less comfortable standard of living III. Retirement income IV. Funds for paying necessary expenses and taxes when the person dies a. I, II, and III b. I, III, and IV c. I, II, and IV d. II, III, and IV 71. Which of the following are the main characteristics of Variable Life Insurance policies? I. The policies can be used for investments, as a source of regular savings and protection. II. The withdrawal and protection benefit are determined by the investment performance of the underlying assets. III. The net withdrawal values of the policies are the gross withdrawal values shown in the policy which includes cash dividends up to the date of surrender, less all indebtedness and includes interests. a. I b. III c. I and II d. All of the above 72. Which of the following statements are FALSE? I. The policyowners may request a partial withdrawal of the policy and the amount will be bet by cashing the units at the offer price. II. Some Variable Life policies grant loans to polcyowners which is limited to a percentage of the cash value. III. The structure of charges and the investment content of a Variable Life policy are specified in the policy document and the policy statement. IV. Commissions and office expenses are met by a variety of implicit charges, some of which are variable. a. I and II b. I and III c. II and III d. All of the above VUL IC Reviewer v.1.6 14 June 2024 Page 17  Insurance Commission Reviewer 73. Which of the following statements about the feature of Regular Premium Variable Life Policy are TRUE? I. Top-ups are usually allowed. II. Premium holidays are usually allowed. III. The level of coverage can be varied. a. I and II b. I and III c. II and III d. I, II, and III 74. Under a regular premium variable whole life insurance plan: I. Premium top-ups and holidays, subject to the life company’s administrative rules are usually allowed. II. Life protection is the main objective of the plan with investment as a nominal purpose. III. Withdrawals after the payment of a few years’ premium are usually allowed. IV. A single premium contribution is made to the policy which uses the premium to purchase units in variable life fund and to provide certain level of life cover. a. II, III, and IV b. I, III, and IV c. I, II, and IV d. I, II, and III 75. Which one of the following statements is NOT TRUE about the benefits of investing in a Variable Life insurance policy? a. The fund provides a highly diversified portfolio, thus, lowering the risk of investment. b. The fund ensures definite high yield for the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios. c. The fund relieves investor from the hassle of administering his/her investment. d. The fund enables small investor to participate in a pool of diversified portfolio in which he/she with low investment capital is likely to have acceded to. 76. Which of the following are some of the features of Variable Life insurance policies? I. Guaranteed withdrawal values II. Variation in sum assured III. Partial Withdrawal a. II b. III c. II and III d. All of the above VUL IC Reviewer v.1.6 14 June 2024 Page 18  Insurance Commission Reviewer 77. The benefits of investing in Variable Life fund include: I. Policyowners have access to pooled and diversified portfolio of investment. II. The policyowner can easily change the level of premium payments as the product design of Variable Life insurance policies have clear structures which cater separately for investment and insurance protection. III. Policyowners can gain access to Variable Life funds managed by professional investment managers. IV. The policyowner is relieved of the day-today administration of his investment. a. I, II, and III b. I, II, and IV c. I, III, and IV d. All of the above 78. Which of the following statements describes the difference between Variable Life products and Traditional Participating Life products? I. Variable Life products allow policyowners to pay top-up premiums from time to time to buy more units for his account, unlike Traditional Participating Life policies. II. Variable Life products allow policyowners to take premium holiday, unlike Traditional Participating Life products. III. Variable Life products can take the form of Whole Life and Endowment policies, unlike Traditional Participating Life products. a. I only b. I and II c. III only d. All of the above 79. To the policyowners, administration benefits under Variable Life include: a. Engaging independent professional fund managers personally to manage the complicated transaction b. Constructing their own diversified portfolio c. Exercising investment expertise by selecting funds that will give higher returns d. Keeping track of their investment through the statements provided regularly by the insurance company 80.Which statement best describe Variable Life? a. Fixed premium with returns that will vary. b. Fixed premium with returns that will not vary. c. Flexible premium with returns that will vary. d. Flexible premium with returns that will not vary. VUL IC Reviewer v.1.6 14 June 2024 Page 19  Insurance Commission Reviewer 81. Variable Life policies, the definition of selling price is: a. The price at which units under the policy is offered for sale by the life company. b. It is also known as the bid price. c. The price at which units under the policy are bought back by the life company. d. It is a fixed amount throughout the life of the policy. 82. The statements below are true about the top-up option of a Variable Life insurance product EXCEPT: a. Policyowners may buy additional units of Variable Life fund and these units will be allocated to new Variable Life insurance policies. b. Policyowners are allowed to make top-up on their policies at any time, subject to a minimum amount. c. The policyowner pays further single premium to make a top-up. d. Further premiums at the time of top-up will be used in full after deducting charges to purchase additional units of the Variable Life funds. 83. Which is NOT a characteristic of a Variable Life policy? a. It is used solely for investment purposes. b. The commission and office expenses are met by explicit charges. c. It has generally, though not necessarily, more exposure to equity investments. d. Its cash value is usually the value of the units allocated to the policy calculated at the prevailing bid price. 84. Which of the following information is NOT required to be disclosed to policyowners to Variable Life policies? a. The premiums received and charges levied during the period b. The number and value of units held at the beginning of the period, bought, and sold during the period, and held at the end of the period c. The net withdrawal as of the statement date d. The basis and frequency of valuing the assets 85. All of these are mandatory provisions in Variable Life policy contract EXCEPT: a. Incontestability Provisions b. The entire Insurance Contract Provision c. Misstatement of Age or Sex Provision d. None of the above VUL IC Reviewer v.1.6 14 June 2024 Page 20  Insurance Commission Reviewer 86. What is the “Net Amount at Risk”? a. The minimum death benefit b. The excess between the minimum death benefit and the value of the policyowner’s separate variable account c. The sum insured d. The difference between the minimum death benefit and the sum assured 87. If a policyowner fails to pay the premium on time and there are no withdrawal values in the account, the policy will: a. Continue in full force for a specific period of grace b. Continue at a reduced sum assured c. Terminate immediately on the day premium is due d. Continue at the same sum assured for the same basic benefits 88. If a policyowner returns the Variable Life insurance contract within the cooling off period, he will receive: a. Nothing b. All premiums paid c. A refund equal to the market value of the units only d. A refund equal to the market value of the units plus initial charges 89. The benefits of investing in variable life funds include _____: I. Policy owners can gain access to variable life finds managed by professional investment managers with proven track record. II. Policy owners have access to pooled or diversified portfolios of investment. III. Policy owners can easily change the level of the premium payments as the product design of variable life insurance policies have clear structures which cater separately for investment and insurance protection. IV. Policy owners can buy a variable life insurance policy only with a high initial investment. a. I, II, and IV b. I, III, and IV c. I, II, and III d. II, III, and IV 90.Which one of the following statements is FALSE? a. Variable life insurance policies offer investors policies with values and indirectly linked to the investment performance of the life company. b. Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyowners as cash dividends. c. Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date. d. The investment element of variable life policies varies according to underlying assets of portfolio. VUL IC Reviewer v.1.6 14 June 2024 Page 21  Insurance Commission Reviewer 91. Which of the following about rebating is FALSE? I. Rebating is prohibited under the Insurance Code. II. Rebating deals with offering the prospect a special inducement to purchase a policy. III. Rebating will enhance the sales performance and uphold the prestige of an agent. a. I and II b. I and III c. II and III d. III 92. Which of the following statements about twisting are TRUE? I. Twisting is a special form of misrepresentation. II. It refers to an agent including a policyholder to discontinue a policy with another company without disclosing the disadvantages of doing so. III. It includes misleading or incomplete comparison of policies. IV. It refers to an agent offering a prospect a special inducement to purchase a policy. a. I, II, and III b. I and IV c. III and IV d. II, III, and IV 93. Which of following statements about option to top-up under variable insurance products are TRUE? I. Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies. II. Further premiums at time of top-up will be used in full, after deducting charges for top- ups, to purchase additional units of the variable life funds. III. To top-up a policy, the policyowner pays further single premium at the time of top-up. IV. Policyowners are normally allowed to top-up their policies at any time, subject to a minimum amount. a. I, II, and III b. I, III, and IV c. I, II, and IV d. II, III, and IV 94. Which of the following statements is/are FALSE? I. The policy value of variable life policies is determined by the offer price at the time of valuation. II. The policy value of endowment policies is the cash values plus any accumulated dividends less any outstanding loans dues at time of surrender. III. The life company needs to maintain a separate account for variable life policies distinct from the general account. a. I b. I and II VUL IC Reviewer v.1.6 14 June 2024 Page 22  Insurance Commission Reviewer c. II and III d. III and IV 95. Which of the following statements about surrender value under traditional participating life insurance products is TRUE? a. The amount of surrender value is usually higher than the amount under non-participating policies and it varies with age of the assured, being lower at the older ages. b. Cash value is paid when a yearly renewable term insurance policy is surrendered. c. In the case of participating policies, the net cash surrender value includes the surrender value of the paid-up addition up to the date of surrender. d. When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with number of units. 96. Characteristics of a variable life insurance policy include: I. Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets. II. Its protection costs are generally met by the explicit charges. III. Its commission and company expenses are met by a variety of implicit charges with normally 6 months’ notice given by the life companies prior to any change. IV. Its withdrawal value is normally the value of units allocated to the policyowner calculated at the bid price. a. I, II, and III b. I, III, and IV c. I, II, and IV d. II, III, and IV 97. Investing in bonds offer the following advantages with the exception of ___. a. Offering protection to the principal and guaranteed steady stream of income b. Allowing the investor a chance for capital preservation c. Enabling the investors an opportunity for capital appreciation d. Being a place of temporary refuge when the investor foresees that the market outlook is uncertain 98. Which of the following statements about risks of investing in variable life funds is TRUE? a. Policyowners who are risk averse should buy variable life insurance policies with high equity investment. b. Investment in variable life fund, which are fully invested in units of equity bonds, are not suitable for policyowners who can tolerate the risks of short-term fluctuations in their cash value. c. Policyowners who invest in variable life funds with the high equity investment face greater risk but can expect to achieve higher return than the traditional life insurance product over the long term. d. Policyowner who are risk averse should not purchase life insurance policies with high protection and guaranteed cash and maturity values. VUL IC Reviewer v.1.6 14 June 2024 Page 23  Insurance Commission Reviewer Answer Key 1. b 21. a 41. d 61. c 81. a 2. c 22. c 42. b 62. d 82. a 3. b 23. c 43. a 63. b 83. a 4. d 24. b 44. d 64. b 84. d 5. c 25. b 45. a 65. c 85. d 6. a 26. d 46. c 66. a 86. b 7. a 27. c 47. c 67. b 87. a 8. a 28. d 48. c 68. c 88. d 9. a 29. c 49. b 69. b 89. a 10. a 30. b 50. b 70. b 90. c 11. d 31. d 51. a 71. c 91. d 12. a 32. b 52. d 72. a 92. a 13. b 33. d 53. d 73. d 93. d 14. a 34. a 54. b 74. d 94. a 15. d 35. d 55. c 75. b 95. a 16. c 36. b 56. b 76. c 96. c 17. d 37. d 57. c 77. d 97. c 18. c 38. c 58. d 78. d 98. c 19. a 39. c 59. b 79. d 20. c 40. c 60 d 80. c VUL IC Reviewer v.1.6 14 June 2024 Page 24