Variable Life Insurance- Agent Licensing Exam Prep Test

50 Questions | Total Attempts: 33

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Variable Life Insurance- Agent Licensing Exam Prep Test

Are you aspiring to become a life insurance agent? And preparing to clear the final exam to earn your license? Before that, you need to have a clear idea of all the legal terms and policies in this field. This quiz especially focuses on the Variable Life Insurance policy. So, to give you the best preparation environment, we have included the fifty most important questions that will help you revise what you already learned.


Questions and Answers
  • 1. 
    Variable life insurance policy owners may make a withdrawal 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 sum assured

    • D. 

      Number of units through cancellation of units

  • 2. 
    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 casting the units at bid price.

    • B. 

      Policy holders can take loans against their variable life policies up to the entire withdrawal value of their policies.

    • C. 

      Policy holders have the flexibility of switching from one fund to another provided it satisfies the company’s switching of criteria.

    • D. 

      Policy holders have the flexibility of increasing or decreasing their premiums variable life policies.

  • 3. 
    The investment returns under variable life insurance policy_______.
    1. Are not guaranteed.
    2. Are Assured
    3. Are linked to the performance of the investment fund management by the life company.
    4. Fluctuate according to the risk and fall of market price
    • A. 

      I, II and III

    • B. 

      I, II and IV

    • C. 

      I, III and IV

    • D. 

      II, III and IV

  • 4. 
    Which of the following statements are TRUE?
    1. The policy value of variable life policies is determined by the offer price at the time of valuation.
    2. The policy value of endowment policies is the cash value plus any accumulated dividends less any outstanding loans due at time of surrender.
    3. The life company needs to maintain a separate account for variable life policies distinct from the general account.
    • A. 

      I and II

    • B. 

      I, II and III

    • C. 

      I and III

    • D. 

      II and III

  • 5. 
    Which of the following statement is 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 life funds offered by company.

  • 6. 
    1. Which of the following statements about variable life policies are TRUE?
    1. Offer price is used to determine the number of units to be cancelled to the account.
    2. The margin between the bid and offer price is used to cover the management cost of the policy.
    3. The policy value is calculated based on the bid price of the units allocated into the policy.
    • A. 

      I, II and III

    • B. 

      I and II

    • C. 

      I and III

    • D. 

      II and III

  • 7. 
    What is the most suitable investment instrument for an investor who is interested in protecting his principal and receiving a steady stream of income?
    • A. 

      Equity

    • B. 

      Warrants

    • C. 

      Variable life policies

    • D. 

      Fixed Income securities

  • 8. 
    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 becomes insolvent.
    • A. 

      I, II

    • B. 

      I, III

    • C. 

      II, III

    • D. 

      I, II and III

  • 9. 
    1. Which of the following statement about the difference between variable life policies and endowment policies are FALSE?
    1. The policy values of variable life and endowment policies directly reflect the performance of the fund of the life company.
    2. The premiums and benefits of the endowment policies are described at inception of the policy whereas variable life policies are flexible.
    3. The benefits and risks variable life and endowment policies directly accrue to the policy holders.
    • A. 

      I and II

    • B. 

      I, II and III

    • C. 

      I and III

    • D. 

      II and III

  • 10. 
    1. Which of the following statements about twisting is FALSE?
    • A. 

      Twisting is a special form of misinterpretation.

    • B. 

      It refers to an agent inducing a policy holder to discontinue 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

  • 11. 
    Mr. Juan Dela Cruz is currently earning P30, 000/month. He is 35 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

  • 12. 
    1. What are the benefits available when investing a variable life funds?
    1. The variable life funds offer policy holders an access to pooled or diversified portfolios.
    2. The variable life policy holder can vary his premium payments, take premium holidays, add single premium top-ups and change the level of sum assured 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. 
    Rank the following in terms of their liquidity, from the least liquid to the most liquid:
    1. Short-Term Securities
    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

  • 14. 
    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 large number of investors sell their shares.

    • C. 

      One whereby investor buyunit in the trust itself and not shares in the company.

    • D. 

      An organization registered under the SECURITY AND ESCHANGE COMMISSION (SEC) which usually invest in a wide range of equities and other investments

  • 15. 
    Under variable life insurance policies______.
    1. There is no guaranteed minimum sum assured for the purpose of declaring dividends.
    2. There is not guaranteed minimum sum assured as a level of life insurance protection.
    3. Each of the policy owner’s premiums will be used to purchase units the number of which is dependents 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

  • 16. 
    The benefits of investing in variable life funds include__.
    1. Policy owners have access to pooled or diversified portfolios of investment.
    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 cater separately for investment and insurance protection.
    3. Policy owners can gain access to variable life funds managed by professional investment managers with proven track records.
    Policy owners can buy a variable life insurance policy only with a high initial investment.
    • A. 

      I, II and IV

    • B. 

      I, II and IV

    • C. 

      I, II and III

    • D. 

      Option 4

  • 17. 
    Which of the 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. 
    Why is it 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 borne solely by the customer.

    • C. 

      Because the agent may give the wrong recommendations.

    • D. 

      Because the policy holders expect higher returns.

  • 19. 
    Which of the following statements about rebating are TRUE?
    1. Rebating is prohibited under the insurance code.
    2. Rebating deals with offering the prospect a social 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. 

      II and III

  • 20. 
    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 policy holders 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.  

  • 21. 
    Which of the following statements about option top-up under variable life insurance products 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 policy holders 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.  

  • 22. 
    The characteristics of a variable life insurance policy include________.
    1. Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets.
    2. Its protection costs are generally met by implicit charges.
    3. Its commission and company expenses are met by a variety of explicit charges with normally 6 months’ notice given by the life company prior to any charges.
    4. Its withdrawal value is normally the value of units allocated 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

  • 23. 
    Which of the following statements about single premium variable life policies are TRUE?
    1. There is no fixed term in a 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.
    3. 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

  • 24. 
    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 investor a chance for capital preservation

    • D. 

      It enables the enables the investors and opportunity for capital appreciation.

  • 25. 
    Which of the following statements about variable life policies are TRUE?
    1. The withdrawal value is not guaranteed.
    2. The volatility of the returns depends in the investment strategy of the fund.
    3. The variable life policy holder has direct control over the investment decisions of the variable life funds.
    • A. 

      I, II and III

    • B. 

      I and II

    • C. 

      I and III

    • D. 

      II and III

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