Which of the following statements about twisting is FALSE? Twisting is a special form of misrepresentation It refers to an agent inducing a policyholder to discontinue policy with another company without disclosing the disadvantage of doing so It includes misleading or incomplete comparison of policies It refers to an agent offering a prospect a special inducement to purchase a policy

It refers to an agent offering a prospect a special inducement to purchase a policy

A unit trust is ______________________

Established by a trust deed which enables a trustee to hold the pool of money and assets in trust on behalf of the investor

Under variable life insurance policies ______________________

There is no guaranteed minimum sum assured as a level of life insurance protection.

The benefits of investing in variable life funds include ______________________?

Policy owners can gain access to variable life funds managed by professional investment managers with proven track records.

Which of the following BEST describes the policy benefits of variable life policies? The policy benefits are payable only for death or disability, The policy benefits will depend on the long-term performance of the life company, The policy benefits are directly linked to the investment performance of the underlying assets., The policy benefits are guaranteed.

The policy benefits are directly linked to the investment performance of the underlying assets.

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

Because the impact of changes in an investment condition on variable life policy is borne solely by the customer.

Which one of the following statements is FALSE? Variable life insurance policies offer investors policies with values indirectly linked to the investment performance of the life company A Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholders as cash dividends Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date The investment element of variable life policies varies according to underlying assets of the portfolio

Both Whole Life and Endowment policies can be used as an investment media with benefits that become payable at a future date

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

Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies

Investing in bonds offers the following advantages EXCEPT: It offers protection to the principal and guarantees steady stream of income, It is a place of temporary refuge when the investor foresees that the market outlook is uncertain, It allows the investor a chance for capital preservations, It enables the investors an opportunity for capital appreciation

It enables the investors an opportunity for capital appreciation

Which of the following statements about benefits in variable life fund is FALSE? The fund provides a highly diversified portfolio, thus, lowering the risk of investment, The fund ensures definite high yield for an investor since it is managed by professionals who are well-versed in the management of risks of investment portfolios, The fund relieves the investor from the hassle of administering his/her investment, 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

The fund ensures definite high yield for an investor since it is managed by professionals who are well-versed in the management of risks of investment portfolios.

The switching facility under variable life insurance policies is very useful ___________.

For the purpose of financial planning by the policy owners

The following statement about surrender value under traditional participating life insurance product is TRUE? Cash value is paid when a yearly renewable term insurance policy is surrendered, When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with the number of units, 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, 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

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.

Which of the following statements about risk of investing in variable life funds is TRUE? Policy owner 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

Policy owner 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

The protection costs under a variable life insurance policy ______________________:

Vary with age of policy owner and level of cover

Which one of the following statements about diversification in portfolio management is FALSE? A diversified portfolio provides greater security to an investor having to sacrifice the return for the portfolio, Diversification can completely eliminate the risk of investing in stocks in a portfolio, Diversification can involve purchasing different types of stocks and investing in stocks of different countries, Diversification helps to spread the portfolio risk by investing in different categories of investment in a portfolio

Diversification can completely eliminate the risk of investing in stocks in a portfolio

Which of the following statements is true about CASH? It has high yield potential, Amount invested in cash depends on the size of the cash flow requirement, Investment in cash increases when there is a bull run in the stock market, Investment in cash decreases when interest rates rise

Amount invested in cash depends on the size of the cash flow requirement

Which of the following statements about investment objective is FALSE? People invest money in fixed deposits to produce high and guaranteed returns, People invest money to enhance a comfortable standard living, People invest money to provide funds for higher education of their children, Investment in commodities has no regular income

Investment in commodities has no regular income

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

The risk of rate of return on the investment not matching up to the individual’s expectation and the risk of losing some or all of a person’s initial investment.

The duties of the trustee of a unit trust DO NOT include: Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself, Ensuring that the fund manager adhere to the provision of the trusts deeds, Acting generally to protect the unit-holders, Holding the pool of money and assets in trust in behalf of the investors

Holding the pool of money and assets in trust in behalf of the investors

Policy fee payable by variable life insurance policy owner is to cover ________________: Options: The handling charges by professional investment managers, The price for each unit bought under the variable life insurance policy, The mortality cost of the variable life insurance policy, The administrative expenses of setting up the variable life insurance policy

The administrative expenses of setting up the variable life insurance policy

The selling price under a variable life insurance policy is:

The price at which units under the policy are offered for sale by the life company

Diversification in investment involves ___________________________:

Reducing the risks of investment by putting one fund under management into several categories of investment

Equity funds __________.

Invest in shares of stocks and the magnitude of the change in unit prices will only depend on the quantity of the equities held

The administrative fee, insurance charge, fund management fee and the like under a variable life insurance policy are __________.

Subject to change by the life company after written notice is given

Which of the following statements is false? Variable life policies can be used for investment, regular savings and protection. The principles of variable life policies vary but all operate on the same features. Variable life policies can be classified as single premium insurance plans or regular premium insurance plans. The withdrawal value and protection benefits are determined by the investment performance of the underlying assets.

The principles of variable life policies vary but all operate on the same features.

Variable Life Insurance Flashcard

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Practice Problem

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Hard

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FLASHCARD QUESTION

Front

Variable life insurance policyowners may make withdrawals in terms of __________.

Back

Number of units or fixed monetary amount through cancellation of units.

FLASHCARD QUESTION

Front

Which of the following statements about the flexibility features of variable life policies is FALSE?
Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at bid price.
Policyholder can take loans against their variable life policies up to the entire withdrawal value of their policies.
Policyholders have the flexibility of switching from one fund to another provided it satisfied the company’s switching criteria.
Policyholders have the flexibility of increasing or decreasing their premiums for regular premiums variable life policies.

Back

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

FLASHCARD QUESTION

Front

The investment returns under variable life insurance policy ________.

Back

I, III and IV

FLASHCARD QUESTION

Front

Which of the following statements are TRUE? Options: I and II, I, II and III, I and III, II and III

Back

I and II

FLASHCARD QUESTION

Front

Which of the following statements is FALSE?
Rebating is to offer a prospect a special inducement to purchase a policy
Twisting is a specific form of misrepresentation
Misrepresentation is a specific form of twisting
Switching is a facility allowing policyholders to switch to another variable life fund offered by the company.

Back

Misrepresentation is a specific form of twisting

FLASHCARD QUESTION

Front

Which of the following statements about variable life policies are TRUE? Options: I, II and III; I and II; I and III; II and III

Back

II and III

FLASHCARD QUESTION

Front

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

Back

Fixed income securities

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