Variable Life Insurance Policy Quiz - Every Agent Must Know This

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Variable Life Insurance Policy Quiz - Every Agent Must Know This - Quiz

Variable universal life insurance is a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of the available separate accounts to use is entirely up to the contract owner. In this quiz are some facts every agent and insurance taker should know.

Questions and Answers

1.

The investment returns under variable life insurance policy_______ I. Are not guaranteed. II. Are assured III. Are linked to the performance of the investment fund managed by the company. IV. Fluctuate according to the performance of the investment funds managed by the fund manager.
- A.
  
  I, II &IV
- B.
  
  I & II
- C.
  
  III &IV
- D.
  
  II, III &IV
Correct Answer
A. I, II &IV

Explanation
The investment returns under variable life insurance policies are not guaranteed. This means that the policyholder may experience fluctuations in their returns based on the performance of the investment funds managed by the company. Therefore, options I, II, and IV are correct.

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2.

Which of the following statement are true? I. The policy value of variable life policies is determined by the offer price time of valuation. II. The policy value of endowment policies is the cash value plus accumulated dividends less any outstanding loans due at time of surrender. III. The life company needs to maintain a separate account for various policies distinct from the general account.
- A.
  
  I and II
- B.
  
  I, II, and III
- C.
  
  I and III
- D.
  
  II and III
Correct Answer
D. II and III

Explanation
The policy value of endowment policies is indeed the cash value plus accumulated dividends less any outstanding loans due at the time of surrender. This means that when a policyholder surrenders their endowment policy, they will receive the cash value of the policy along with any accumulated dividends, minus any outstanding loans. Additionally, the statement that the life company needs to maintain a separate account for various policies distinct from the general account is also true. This is done to ensure that the funds and assets related to specific policies are properly accounted for and managed separately from the company's general funds.

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3.

Variable life insurance policy owners may make NO withdrawals in terms of ______.
- A.
  
  Number of units or fixed monetary amount through cancellation of units
- B.
  
  Number of units or fixed monetary amount through reduction of the life cover sum assured.
- C.
  
  Fixed monetary amount only through reduction of the life cover of units.
- D.
  
  Number of units through cancellation of units.
Correct Answer
A. Number of units or fixed monetary amount through cancellation of units

Explanation
Variable life insurance policies allow policy owners to make withdrawals in terms of either a fixed monetary amount or a cancellation of units. This means that they have the option to withdraw a specific amount of money from their policy or to cancel a certain number of units from their coverage. This flexibility allows policy owners to adjust their coverage and access funds as needed.

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4.

Which of the following statements about the flexibility features of variable life policies is FALSE?
- A.
  
  Policy holders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at bid price
- B.
  
  Policy holders can make loans against their variable life up to the entire withdrawal value of their policies
- C.
  
  Policy holders have the flexibility of switching from one fund to another provided it signifies the companies switching criteria.
- D.
  
  Policy holders have the flexibility of increasing or decreasing their premium for regular premium variable life policies.
Correct Answer
B. Policy holders can make loans against their variable life up to the entire withdrawal value of their policies

Explanation
The correct answer is that policy holders cannot make loans against their variable life up to the entire withdrawal value of their policies. Variable life policies typically allow policy holders to take out loans against the cash value of their policies, but the amount available for loans is typically less than the full withdrawal value.

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5.
Which of the following statements about the difference between variable life policies and endowment policies are FALSE?
1. The policy value of variable life endowment policies directly reflects the performance of the fund of the company.
2. 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.
3. The benefits and risk of variable life and endowment policies directly rescue to the policy holders.
- A.
  
  I and II
- B.
  
  I, II and III
- C.
  
  I and III
- D.
  
  I, II and III
Correct Answer
C. I and III

Explanation
Variable life policies and endowment policies differ in several ways. However, the given statement that the policy value of variable life endowment policies directly reflects the performance of the fund of the company is false. In variable life policies, the policy value is determined by the performance of the underlying investments chosen by the policyholder, not the company's fund. Additionally, the statement that the benefits and risk of variable life and endowment policies directly rescue to the policyholders is also false. The benefits and risks of these policies are borne by the policyholders themselves.

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6.
What are the disadvantages of investing in common shares?
1. Dividends are paid not more than fixed rates.
2. Investors are exposed to market and specific risks.
3. Shares can become worthless if company becomesinsolvent.
- A.
  
  I and II
- B.
  
  I and III
- C.
  
  II and III
- D.
  
  I, II and III
Correct Answer
C. II and III

Explanation
The correct answer is II and III. This means that the disadvantages of investing in common shares include being exposed to market and specific risks, as well as the possibility of shares becoming worthless if the company becomes insolvent. This implies that common shares are subject to fluctuations in the market and can result in a total loss of investment if the company fails.

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7.

What is the most suitable investment instrument for an investor who has interested in protecting his principal and receiving a steady stream of income?
- A.
  
  Equities.
- B.
  
  Warrants
- C.
  
  Variable Life Policies
- D.
  
  Fixed Income Securities
Correct Answer
D. Fixed Income Securities

Explanation
Fixed income securities are the most suitable investment instrument for an investor who wants to protect their principal and receive a steady stream of income. Unlike equities or warrants, fixed income securities provide a fixed interest or dividend payment, ensuring a predictable income stream. Additionally, these securities are generally considered less risky compared to equities, making them a safer option for protecting the principal investment. Variable life policies are insurance products and may not provide a consistent income stream, making them less suitable for this purpose.

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8.
Which of the following statements about the Variable Life Policies are TRUE?
1. Offer price is used to determine the number of units to be credited to the accounts.
2. The margin between the bid and the offer price is used to cover the management cost of the policy.
3. The policy value is calculated based on the bid price of units allocated into the policy
- A.
  
  All of the above
- B.
  
  I and II
- C.
  
  I and III
- D.
  
  II and III
Correct Answer
A. All of the above

Explanation
Variable life policies use the offer price to determine the number of units credited to the accounts. The margin between the bid and offer price is used to cover the management cost of the policy. Additionally, the policy value is calculated based on the bid price of units allocated into the policy. Therefore, all of the statements provided are true.

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9.

Which of the following statements are FALSE?
- A.
  
  Rebating is to offer a prospect a special inducement to purchase a policy.
- B.
  
  Twisting is a specific form of misinterpretation.
- C.
  
  Misinterpretation is a specific form of twisting.
- D.
  
  Switching is a facility allowing policy holders to switch to another variable fund offered by company.
Correct Answer
C. Misinterpretation is a specific form of twisting.

Explanation
Misinterpretation is not a specific form of twisting. Twisting refers to the act of persuading a policyholder to surrender an existing policy and replace it with a new one, often to the policyholder's detriment. Misinterpretation, on the other hand, refers to providing incorrect or misleading information about a policy or its terms. While both twisting and misinterpretation involve deception in the insurance industry, they are distinct concepts.

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10.

A UNIT TRUST is __________________
- A.
  
  Established by a trust need which enables a trustee to hold the pooled 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 the number of investors to get their shares.
- C.
  
  One whereby investor buy units in the trust itself and not shares of the company.
- D.
  
  An organization invest in a wide range of equities and investment.
Correct Answer
A. Established by a trust need which enables a trustee to hold the pooled money and assets in trust on behalf of the investor.

Explanation
A UNIT TRUST is established by a trust deed which enables a trustee to hold the pooled money and assets in trust on behalf of the investor. This means that the investor's money and assets are held and managed by a trustee, who has a legal obligation to act in the best interest of the investor. The trustee is responsible for making investment decisions and managing the assets within the trust. This structure provides investors with a level of security and protection, as their investments are held separately from the trustee's own assets.

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11.
Rank the following in terms of their liquidity, from the least liquid to most liquid.
1. Short term security
2. Property
3. Cash
4. Equities
- A.
  
  IV, II, III, I
- B.
  
  III, I, IV, II
- C.
  
  II, I, IV, III
- D.
  
  II, IV, I, III
Correct Answer
D. II, IV, I, III

Explanation
The correct answer is II, IV, I, III. This ranking is based on the liquidity of the assets listed. Property (II) is the least liquid because it can take time to sell and convert into cash. Equities (IV) are also not as liquid as cash because they need to be sold on the stock market before turning into cash. Cash (I) is the most liquid asset as it can be easily used for transactions. Short term securities (III) are more liquid than property and equities but less liquid than cash.

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12.
What are the benefits available when investing in variable life funds?
1. The variable life funds offer policy holders an access to pooled or diversified portfolio.
2. The variable life policy holders can vary the premium payments, take premium holidays, and single premium top-ups and change the level of sum insured easily.
3. The variable life policy holder can have access to 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
Correct Answer
A. I and II

Explanation
Investing in variable life funds offers policy holders the benefits of accessing a pooled or diversified portfolio. This means that their investments are spread across different assets, reducing the risk of loss. Additionally, variable life policy holders have the flexibility to vary their premium payments, take premium holidays, and make single premium top-ups. This allows them to adjust their investment strategy based on their financial situation. However, the answer does not include the benefit of having access to qualified and trained professional fund managers, as stated in option III. Therefore, the correct answer is I and II.

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13.

Mr. Juan dela Cruz is currently earning P30,000 per month. He is 36 years old and has a reasonable amount of savings. He has a moderate level of risk tolerance. What kind of policy would you recommend for him to buy?
- A.
  
  Participating Endowment
- B.
  
  Variable Life policies
- C.
  
  Participating Whole Life
- D.
  
  Annuities
Correct Answer
B. Variable Life policies

Explanation
Based on the given information, Mr. Juan dela Cruz is earning a moderate income and has a moderate level of risk tolerance. Variable Life policies would be a suitable recommendation for him because they offer both a life insurance component and an investment component. This type of policy allows the policyholder to allocate their premiums towards various investment options, giving them the potential for higher returns. Given Mr. Juan dela Cruz's reasonable amount of savings, he may be interested in the investment aspect of the policy to grow his wealth.

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14.

Which of the following statements about twisting is FALSE?
- A.
  
  Twisting is a special form of misrepresentation
- B.
  
  Refers to an agent inducing a policy holder to discontinue with another company without disclosing the disadvantages 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.
Correct Answer
D. It refers to an agent offering a prospect a special inducement to purchase a policy.

Explanation
Twisting is a practice where an agent convinces a policyholder to switch from one company to another without fully disclosing the drawbacks of such a decision. It involves misleading or incomplete comparisons of policies. However, it does not refer to an agent offering a prospect a special inducement to purchase a policy. This statement is false because twisting does not involve offering incentives or inducements to potential policyholders.

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15.
Which of the following statement about rebating are TRUE
1. Rebating is prohibited under the insurance code.
2. Rebating deals with offering the prospect a special inducement to purchase a policy.
3. Rebating will enhance the sales performance and uphold the prestige of an agent.
- A.
  
  I and II
- B.
  
  I and III
- C.
  
  I, II and III
- D.
  
  II and III
Correct Answer
A. I and II

Explanation
Rebating is prohibited under the insurance code because it involves offering the prospect a special inducement to purchase a policy. This practice is considered unethical and can lead to unfair competition among insurance agents. The statement that rebating will enhance the sales performance and uphold the prestige of an agent is not true, as it goes against the regulations set by the insurance code.

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16.

Why it is important that the customer must 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 is borne solely by the customer.
- C.
  
  Because the agent may give the wrong recommendations
- D.
  
  Because the policy holders expect higher returns
Correct Answer
B. Because the impact of changes in investment condition on variable life policy is borne solely by the customer.

Explanation
It is important for the customer to understand the sales proposal in full because the impact of changes in investment conditions on a variable life policy is solely borne by the customer. This means that if there are any negative changes in the investment conditions, it will directly affect the customer's policy and potentially reduce their returns. Therefore, understanding the proposal will allow the customer to make an informed decision and assess the potential risks involved in the policy.

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17.

Which of the following BEST describes the policy benefits 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
Correct Answer
C. The policy benefits are directly linked to the investment performance of the underlying assets

Explanation
Variable life policies are a type of life insurance policy where the policy benefits are directly linked to the investment performance of the underlying assets. This means that the value of the policy benefits can fluctuate based on the performance of the investments made by the life insurance company. Unlike other types of life insurance policies, the policy benefits are not guaranteed and can vary over time.

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18.
The benefits of investing in variable life funds include_____.
1. Policy owners have access to period or diversified portfolio of investments.
2. Policy owners can easily change the level of the premium payments as the product design of variable life insurance policies have clear structures which enter separately for investment and insurance protection.
3. Policy owners can’t gain access to variable life funds managed by professional investment managers with proven track records.
4. Policy owners can but a variable life insurance policy only with a high investment
- A.
  
  I,II and IV
- B.
  
  I, III and IV
- C.
  
  I, II and III
- D.
  
  II, III and IV
Correct Answer
C. I, II and III

Explanation
The benefits of investing in variable life funds include having access to a period or diversified portfolio of investments, being able to easily change the level of premium payments, and gaining access to variable life funds managed by professional investment managers with proven track records.

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19.
Under variable life insurance policies _________.
1. There is no guaranteed minimum sum assured for the purpose of declaring dividends.
2. There is no guaranteed minimum sum assured as a level of life insurance protection.
3. 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.
4. Purchase of units can only be made from the variable life fund itself, which will then create new units and add the investment monies to the value of the fund.
- A.
  
  I and IV
- B.
  
  II and IV
- C.
  
  III and IV
- D.
  
  II and III
Correct Answer
C. III and IV

Explanation
Variable life insurance policies do not have a guaranteed minimum sum assured as a level of life insurance protection. Instead, each policy owner's premium is used to purchase units, the number of which is dependent on the selling price of each unit. Additionally, the purchase of units can only be made from the variable life fund itself, which will then create new units and add the investment monies to the value of the fund.

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20.
Which of the following statements about single premium variable life policies are TRUE?
1. There is no fixed term in single premium variable life policy and therefore they are technically whole life insurance.
2. Top-ups or single premium injections are allowed in these plans.
Policy holders have the flexibility of varying the level cover.
- A.
  
  I, II and III
- B.
  
  II and III
- C.
  
  I and II
- D.
  
  I and III
Correct Answer
A. I, II and III

Explanation
Single premium variable life policies do not have a fixed term, meaning they provide coverage for the entire life of the insured, making them technically whole life insurance. These policies also allow for top-ups or single premium injections, giving policy holders the flexibility to add additional funds to their policy. Additionally, policy holders have the flexibility to vary the level of cover, allowing them to adjust the amount of coverage based on their changing needs.

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21.
The Characteristics of a variable life insurance policy include ___________.
1. Its withdrawal value and protection benefits aredetermined by the investment performance of theunderlying assets.
2. Its protection cost is generally met by implicit changes.
3. Its commissions and company expenses are met by a variety of explicit charges.
4. Its withdrawal value is normally the value of unitsallocated to the policy owner calculated at the bid price.
- A.
  
  I, II and III
- B.
  
  II, III and IV
- C.
  
  I, II and IV
- D.
  
  I, III and IV
Correct Answer
D. I, III and IV

Explanation
Variable life insurance policies have several characteristics. The first characteristic mentioned in the answer is that the withdrawal value and protection benefits of the policy are determined by the investment performance of the underlying assets. This means that the value of the policy and the benefits it provides can fluctuate based on how well the investments perform. The third characteristic is that commissions and company expenses are met by explicit charges. This means that the policyholder will be charged fees for these expenses. The fourth characteristic is that the withdrawal value is normally the value of units allocated to the policy owner calculated at the bid price. This means that the value of the policy when withdrawn is based on the number of units allocated to the policyholder and the bid price of those units.

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22.

Which of the following statements about option to top-up under variable life insurance product is FALSE?
- A.
  
  Policy owners may buy additional units of variable life and these units will be allocated to new variable life insurance policies.
- B.
  
  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.
- C.
  
  To top-up a policy, the policy owner pays further single premium at the time of top-up.
- D.
  
  Policy owners are normally allowed to top-up their policies at any time, subject to a minimum amount.
Correct Answer
A. Policy owners may buy additional units of variable life and these units will be allocated to new variable life insurance policies.

Explanation
The statement that is FALSE is "Policy owners may buy additional units of variable life and these units will be allocated to new variable life insurance policies." This is incorrect because when policy owners top-up their policies, the additional units of variable life are allocated to the existing policy and not to new policies.

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23.

Which of the following statement are FALSE?
- A.
  
  Variable life insurance policies offer investors policies with value indirectly linked to the investment performance of the life company
- B.
  
  Life Company will carry out a valuation of the funds yearly and any surplus may be allocated to a participating policy holder 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 the portfolio.
Correct Answer
A. Variable life insurance policies offer investors policies with value indirectly linked to the investment performance of the life company

Explanation
Variable life insurance policies offer investors policies with value directly linked to the investment performance of the life company.

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24.
Which of the following statements about variable life policies are TRUE?
1. The withdrawal value is not agreed.
2. The volatility of the returns depends on the investment strategy of the fund.
3. The Variable life policy holder has direct control over the investment decision of the variable life fund.
- A.
  
  I, II and III
- B.
  
  I and II
- C.
  
  I and III
- D.
  
  II and III
Correct Answer
B. I and II

Explanation
Variable life policies are a type of life insurance policy that combines a death benefit with an investment component. Statement I is true because the withdrawal value of a variable life policy is not guaranteed and can fluctuate based on the performance of the investment component. Statement II is true because the volatility of the returns of a variable life policy depends on the investment strategy of the fund, which can vary in terms of risk and return potential. Statement III is not true because while the policyholder may have some input in the investment decisions, they do not have direct control over them.

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25.

Investing in bonds offers the following advantages EXCEPT?
- A.
  
  It offers protection to the principal and guaranteed steady stream of income.
- B.
  
  It is a place of temporary refuge when the investor foresees that the market outlook is uncertain.
- C.
  
  It allows the investors a chance for capital preservation.
- D.
  
  It enables the inventor an opportunity for capital appreciation.
Correct Answer
D. It enables the inventor an opportunity for capital appreciation.

Explanation
Investing in bonds does not typically offer the opportunity for capital appreciation. Unlike stocks or other equity investments, the return on bonds is primarily in the form of interest payments and the return of the principal amount. While bond prices can fluctuate, the main focus of bond investing is on income generation and preservation of capital.

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26.

Single Premium variable life insurance policy
- A.
  
  Must be issued with a minimum death benefit
- B.
  
  Must be issued with a maximum withdrawal value.
- C.
  
  Has no death benefits
- D.
  
  Has no withdrawal value
Correct Answer
A. Must be issued with a minimum death benefit

Explanation
A single premium variable life insurance policy must be issued with a minimum death benefit because it is a type of life insurance policy that combines the features of both life insurance and investment. The policyholder pays a lump sum premium upfront, and the policy's cash value fluctuates based on the performance of the underlying investments. In order to provide a death benefit to the beneficiaries, the policy must have a minimum death benefit amount specified at the time of issuance. This ensures that there is a guaranteed payout to the beneficiaries in case of the policyholder's death.

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27.
Which of the following statements about characteristics of variable life policies are TRUE?
1. Variable life policies generally have a larger exposure to equity investment than with participating and other traditional policies.
2. The protection cost is generally met by implicit charges which vary with age level of cover.
3. 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
Correct Answer
D. I and III

Explanation
Variable life policies generally have a larger exposure to equity investment than with participating and other traditional policies. This means that variable life policies tend to invest a larger portion of their funds in equity investments, which can result in higher potential returns but also higher risk.

Commissions and company expenses are met by a variety of explicit charges, some of which are variable. This means that variable life policies charge explicit fees to cover commissions and company expenses, and some of these fees may vary depending on certain factors. This can include factors such as the age of the policyholder or the level of coverage.

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28.

The following statement about surrender value under traditional participating life insurance products are TRUE?
- A.
  
  Cash Value is paid when a yearly renewable term insurance policy is surrendered
- B.
  
  When participating insurance policy is surrendered the surrender value is calculated by multiplying the old price with number of units
- C.
  
  The amount of surrender value is usually higher than the amount under non-participating policies and it varies with the Age of the insured being lower at elder ages
- D.
  
  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
Correct Answer
D. 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

Explanation
The net cash surrender value of a participating policy includes the surrender value of the paid-up addition up to the date of surrender. This means that if a policyholder decides to surrender their participating policy, they will receive the cash value of any paid-up additions that have accumulated in the policy up until the surrender date. This is a benefit of participating policies as it allows policyholders to receive additional value from their policy when surrendering it.

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29.
The fundamental differences between traditional participating life insurance policies and variable life insurance policies include ______.
1. Variable life insurance policies are less likely to offer more choice in terms of the type of investment funds.
2. The investment element of variable life insurance policies is made known to the policy owner at the outset and is invented in a separately identifiable fund which is made up units of investments.
3. 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
Correct Answer
B. II, III and IV

Explanation
The correct answer is II, III and IV. This is because the statement in option II explains that variable life insurance policies have an investment element that is made known to the policy owner at the beginning and is invested in a separate fund. Option III states that traditional participating policies aim to produce a steady return by smoothing out market fluctuations. Option IV suggests that variable life insurance policies are less likely to offer more choice in terms of investment funds.

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30.
The flexibility benefits of investing in variable life funds include.
1. Policy owners can easily change the level of sum assured and switch their investment between funds.
2. Policy owners can easily take premium holidays and add single premium to top-ups.
3. Variable life insurance products have a simple product design with a clear structure which caters separately for the investment and insurance protection.
4. Policy owners can easily change the level of their premium payments.
- A.
  
  all of the above
- B.
  
  I, II and III
- C.
  
  I, II and IV
- D.
  
  I, III and IV
Correct Answer
A. all of the above

Explanation
The correct answer is "all of the above" because all of the statements mentioned in the options are true. Policy owners of variable life funds can easily change the level of sum assured, switch their investment between funds, take premium holidays and add single premium top-ups, and change the level of their premium payments. Additionally, variable life insurance products have a simple product design that separates the investment and insurance protection aspects.

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31.

The Switching facility under variable life insurance policies is a very useful ________.
- A.
  
  For the purpose of profit planning by the life policies.
- B.
  
  For the purpose of assets planning by the trustees
- C.
  
  For the Purpose of sales planning by the fund managers
- D.
  
  For the purpose of financial planning by the policy owners
Correct Answer
D. For the purpose of financial planning by the policy owners

Explanation
The switching facility under variable life insurance policies is a very useful tool for policy owners to engage in financial planning. It allows them to reallocate their investments among different funds offered by the insurance company based on their changing financial goals and market conditions. This flexibility enables policy owners to optimize their investment returns and manage risk according to their individual needs and preferences.

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32.
The protection cost under a variable life insurance policy ____.
1. Are met by a flat initial charge for the regular premium
2. Are generally covered by cancellation of units in the fund
3. Are generally met by explicit charges stipulated openly in the policy name.
4. Vary with age of policy owner and level of cover
- A.
  
  I, II and III
- B.
  
  I, II and IV
- C.
  
  I, II and IV
- D.
  
  II, III, I and IV
Correct Answer
D. II, III, I and IV

Explanation
The protection cost under a variable life insurance policy is generally covered by cancellation of units in the fund (II), are generally met by explicit charges stipulated openly in the policy name (III), vary with age of policy owner and level of cover (IV), and are met by a flat initial charge for the regular premium (I).

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33.

Which of the following about risks of investing in variable life funds is TRUE?
- A.
  
  Policy owners who are risk averse should buy variable life insurance policies with high quality investment.
- B.
  
  Investment in Variable life funds which are fully invested in units of equity bonds are not suitable for the policy owner who can tolerate the risks of short-term fluctuation in their cash value
- C.
  
  Policy owner who invest in variable life funds with high investment face greater risk but can expect to achieve higher return than the traditional life insurance product over the long term.
- D.
  
  Policy owner who are risk adverse should not purchase life insurance policies with high protection and guaranteed cash and maturity values.
Correct Answer
C. Policy owner who invest in variable life funds with high investment face greater risk but can expect to achieve higher return than the traditional life insurance product over the long term.
34.
1. What would be the withdraw value after a year?
Offer Price = P 16.00 Bid Offer Price = 4.36 Number of units bought = 25,000 Policy Fee = 1.60 Admin and Mortality charge = 8.75 Admin for top-up = 2,000 Sum assured is 190% of single premium on the value of units whichever is higher. ASSUMPTIONS:
1. Charges and Fees are deducted after the single premium has been invested into the account.
2. The growth rate of the unit price and 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
Correct Answer
C. Ps. 401, 107.58
35.
What are the advantages of investing in preferred shares.
1. It gives the shareholders the right to fixed dividends
2. Has priority over company assets during dissolution
3. They enjoy benefit of capital appreciation
- A.
  
  I, II and III
- B.
  
  I and II
- C.
  
  I and III
- D.
  
  II and III
Correct Answer
B. I and II

Explanation
Preferred shares have several advantages for investors. Firstly, they give shareholders the right to fixed dividends, meaning they are entitled to receive a set amount of dividend payments before common shareholders. This provides a stable income stream for investors. Secondly, preferred shares have priority over company assets during dissolution. If the company goes bankrupt and its assets are liquidated, preferred shareholders are paid back their investment before common shareholders. This provides a level of security and protection for preferred shareholders. Therefore, the correct answer is I and II.

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36.

Which of the following statements about diversification in portfolio management is FALSE?
- A.
  
  A diversified portfolio provides greater security to an investor having to sacrifice the return for the portfolio.
- B.
  
  Diversification can completely eliminate the risk of investing in stocks of portfolio.
- C.
  
  Diversification can involve purchasing different types of stocks and investing in stocks in different countries.
- D.
  
  Diversification helps to spread the portfolio risk by investing in different categories ofinvestment in aportfolio.
Correct Answer
B. Diversification can completely eliminate the risk of investing in stocks of portfolio.
37.
1. The objective of satisfying customers need profitability can be achieved by an agent through _________.
1. The giving of freebies to the customers.
2. Extensive investments training by the company
3. The use of sales plan, where sales goals, strategies and objectives are coordinated with market analysis, segmentation and targeting.
4. The giving of monetary assistance and discount to the customer
- A.
  
  I and II
- B.
  
  II and III
- C.
  
  I, II and IV
- D.
  
  II, III and IV
Correct Answer
B. II and III

Explanation
The objective of satisfying customers' needs profitability can be achieved by an agent through extensive investments training by the company and the use of a sales plan. Extensive investments training helps agents develop the necessary skills and knowledge to understand and meet customers' needs effectively. A sales plan, which includes setting sales goals, strategies, and objectives based on market analysis, segmentation, and targeting, helps agents align their efforts with customer demands and maximize profitability. The giving of freebies and monetary assistance and discounts may be tactics used to attract and retain customers, but they alone may not ensure long-term profitability.

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38.
Under regular premium variable whole life insurance plan__.
1. Premium top-ups and holidays, subject to the life company’s administrative rules are usually allowed.
2. Life protection is the main objective of the plan with the investment as a nominal purpose.
3. Withdrawals after the payment of a few years’ premium are usually allowed.
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 cover.
- A.
  
  II, III and IV
- B.
  
  I, III and IV
- C.
  
  I, II and IV
- D.
  
  I, II and III
Correct Answer
D. I, II and III

Explanation
Under regular premium variable whole life insurance plans, premium top-ups and holidays are usually allowed, meaning that policyholders can increase their premium payments or take breaks from making payments, subject to the life company's administrative rules. The main objective of the plan is life protection, with the investment serving as a nominal purpose. Additionally, withdrawals after the payment of a few years' premium are typically allowed. This indicates that the correct answer is I, II, and III.

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39.

Which one of the following statements is true about CASH?
- A.
  
  It has high yield potential
- B.
  
  Amounts invested in cash depend on the size of the cash flow requirement.
- C.
  
  Investment in cash increase when there is a bull run in the stock market.
- D.
  
  Investment in cash decrease when interest rates rise.
Correct Answer
B. Amounts invested in cash depend on the size of the cash flow requirement.

Explanation
The correct answer is "Amounts invested in cash depend on the size of the cash flow requirement." This statement is true because the amount of money invested in cash is determined by the specific cash flow needs of an individual or organization. If there is a higher cash flow requirement, more money will be invested in cash to meet those needs. Conversely, if the cash flow requirement is lower, less money will be invested in cash. This decision is not influenced by factors such as yield potential, stock market performance, or interest rates.

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40.

Variable funds can be invested in financial instruments including cash funds, bond funds, equity funds, property funds, specialized funds, and diversified funds. Equity Funds ______.
- A.
  
  Invest in shares of stock and magnitude of the change in unit prices will only depend on the quantity of the equities hold
- B.
  
  Invest in shares of stocks and during market recession, such assets are usually the last to depreciate.
- C.
  
  Invest in shares of stocks which are inherently of lower risk in nature and the prices of stocks are stable.
- D.
  
  Invest in shares of stock and investors who buy such assets usually aims for capital appreciation
Correct Answer
D. Invest in shares of stock and investors who buy such assets usually aims for capital appreciation

Explanation
Equity funds invest in shares of stock, and investors who buy such assets usually aim for capital appreciation. This means that they are looking for the value of their investment to increase over time. The statement mentions that equity funds invest in shares of stock, which aligns with the nature of equity funds. Additionally, it states that investors who buy such assets usually aim for capital appreciation, indicating that they are seeking to grow their investment rather than just maintain its value.

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41.

The duties of the trustees of unit trust do not include:
- A.
  
  Managing the portfolio of investments and administering the buying and selling of shares in the unit trust itself.
- B.
  
  Ensuring that the fund manager adheres to the provision of the trust deeds
- C.
  
  Acting generally to protect the unit-holders
- D.
  
  Holding the pool money and assets in trust in behalf of the investors
Correct Answer
A. Managing the portfolio of investments and administering the buying and selling of shares in the unit trust itself.

Explanation
The duties of the trustees of a unit trust include ensuring that the fund manager adheres to the provisions of the trust deeds, acting generally to protect the unit-holders, and holding the pool money and assets in trust on behalf of the investors. However, managing the portfolio of investments and administering the buying and selling of shares in the unit trust itself is not one of their duties.

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42.

Diversification in investment involves_____.
- A.
  
  Putting all the funds under management into one category of investment.
- B.
  
  Spreading the risk of investment by not putting the fund into several categories of investment
- C.
  
  Reducing the risk of investment by putting one fund under management into several categories of investment
- D.
  
  Reducing the risk of investment by putting all one’s eggs in one basket.
Correct Answer
C. Reducing the risk of investment by putting one fund under management into several categories of investment

Explanation
Diversification in investment involves reducing the risk of investment by putting one fund under management into several categories of investment. This strategy helps to spread the risk across different types of investments, such as stocks, bonds, and real estate, rather than putting all the funds into one category. By diversifying, investors can potentially minimize the impact of any single investment's performance on their overall portfolio. This approach aims to create a balance between risk and return by not relying too heavily on a single investment.

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Current Version
Sep 04, 2023

Quiz Edited by
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Apr 16, 2021

Quiz Created by
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Variable Life Insurance Policy Quiz - Every Agent Must Know This

The investment returns under variable life insurance policy_______ I. Are not guaranteed. II. Are assured III. Are linked to the performance of the investment fund managed by the company. IV. Fluctuate according to the performance of the investment funds managed by the fund manager.

Variable life insurance policy owners may make NO withdrawals in terms of ______.

Which of the following statements about the flexibility features of variable life policies is FALSE?

What are the disadvantages of investing in common shares?

Dividends are paid not more than fixed rates.

Investors are exposed to market and specific risks.

Shares can become worthless if company becomesinsolvent.

What is the most suitable investment instrument for an investor who has interested in protecting his principal and receiving a steady stream of income?

Which of the following statements are FALSE?

A UNIT TRUST is __________________

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

Short term security

Property

Cash

Equities

Mr. Juan dela Cruz is currently earning P30,000 per month. He is 36 years old and has a reasonable amount of savings. He has a moderate level of risk tolerance. What kind of policy would you recommend for him to buy?

Which of the following statements about twisting is FALSE?

Which of the following statement about rebating are TRUE

Rebating is prohibited under the insurance code.

Rebating deals with offering the prospect a special inducement to purchase a policy.

Rebating will enhance the sales performance and uphold the prestige of an agent.

Why it is important that the customer must understand the sales proposal in full?

Which of the following BEST describes the policy benefits variable life policies?

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

Which of the following statement are FALSE?

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

The withdrawal value is not agreed.

The volatility of the returns depends on the investment strategy of the fund.

The Variable life policy holder has direct control over the investment decision of the variable life fund.

Investing in bonds offers the following advantages EXCEPT?

Single Premium variable life insurance policy

The following statement about surrender value under traditional participating life insurance products are TRUE?

The Switching facility under variable life insurance policies is a very useful ________.

Which of the following about risks of investing in variable life funds is TRUE?

What are the advantages of investing in preferred shares.

It gives the shareholders the right to fixed dividends

Has priority over company assets during dissolution

They enjoy benefit of capital appreciation

Which of the following statements about diversification in portfolio management is FALSE?

Which one of the following statements is true about CASH?

Variable funds can be invested in financial instruments including cash funds, bond funds, equity funds, property funds, specialized funds, and diversified funds. Equity Funds ______.

The duties of the trustees of unit trust do not include:

Diversification in investment involves_____.

Variable Life Insurance Policy Quiz - Every Agent Must Know This

The investment returns under variable life insurance policy_______ I. Are not guaranteed. II. Are assured III. Are linked to the performance of the investment fund managed by the company. IV. Fluctuate according to the performance of the investment funds managed by the fund manager.

Variable life insurance policy owners may make NO withdrawals in terms of ______.

Which of the following statements about the flexibility features of variable life policies is FALSE?

What are the disadvantages of investing in common shares? Dividends are paid not more than fixed rates. Investors are exposed to market and specific risks. Shares can become worthless if company becomesinsolvent.

What is the most suitable investment instrument for an investor who has interested in protecting his principal and receiving a steady stream of income?

Which of the following statements are FALSE?

A UNIT TRUST is __________________

Rank the following in terms of their liquidity, from the least liquid to most liquid. Short term security Property Cash Equities

Mr. Juan dela Cruz is currently earning P30,000 per month. He is 36 years old and has a reasonable amount of savings. He has a moderate level of risk tolerance. What kind of policy would you recommend for him to buy?

Which of the following statements about twisting is FALSE?

Which of the following statement about rebating are TRUE Rebating is prohibited under the insurance code. Rebating deals with offering the prospect a special inducement to purchase a policy. Rebating will enhance the sales performance and uphold the prestige of an agent.

Why it is important that the customer must understand the sales proposal in full?

Which of the following BEST describes the policy benefits variable life policies?

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

Which of the following statement are FALSE?

Which of the following statements about variable life policies are TRUE? The withdrawal value is not agreed. The volatility of the returns depends on the investment strategy of the fund. The Variable life policy holder has direct control over the investment decision of the variable life fund.

Investing in bonds offers the following advantages EXCEPT?

Single Premium variable life insurance policy

The following statement about surrender value under traditional participating life insurance products are TRUE?

The Switching facility under variable life insurance policies is a very useful ________.

Which of the following about risks of investing in variable life funds is TRUE?

What are the advantages of investing in preferred shares. It gives the shareholders the right to fixed dividends Has priority over company assets during dissolution They enjoy benefit of capital appreciation

Which of the following statements about diversification in portfolio management is FALSE?

Which one of the following statements is true about CASH?

Variable funds can be invested in financial instruments including cash funds, bond funds, equity funds, property funds, specialized funds, and diversified funds. Equity Funds ______.

The duties of the trustees of unit trust do not include:

Diversification in investment involves_____.

What are the disadvantages of investing in common shares?

Dividends are paid not more than fixed rates.

Investors are exposed to market and specific risks.

Shares can become worthless if company becomesinsolvent.

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

Short term security

Property

Cash

Equities

Which of the following statement about rebating are TRUE

Rebating is prohibited under the insurance code.

Rebating deals with offering the prospect a special inducement to purchase a policy.

Rebating will enhance the sales performance and uphold the prestige of an agent.

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

The withdrawal value is not agreed.

The volatility of the returns depends on the investment strategy of the fund.

The Variable life policy holder has direct control over the investment decision of the variable life fund.

What are the advantages of investing in preferred shares.

It gives the shareholders the right to fixed dividends

Has priority over company assets during dissolution

They enjoy benefit of capital appreciation