Variable Life Insurance Policy Quiz - Every Agent Must Know This

42 Questions | Total Attempts: 24

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Variable Life Insurance Policy Quiz - Every Agent Must Know This

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

  • 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

  • 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.

  • 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.

  • 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

  • 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

  • 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

  • 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

  • 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.

  • 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.

  • 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

  • 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

  • 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

  • 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.

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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.  

  • 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.

  • 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

  • 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.

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