VUL EXAM 2

Variable life funds can be invested in any financial instruments including bond funds, prosperity funds, specialized funds, and equity funds. 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.

• Invest in shares of stocks and during market recession, such assets are usually the last to depresiate

• Invest in share of stocks which are inherently of lower risk in nature and the prices of stocks are stable

• Invest in share of stocks and investor who buys such assets usually aims for capital appreciation

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

• I,II and III

• I,II and IV

• I,III and IV

• II,III and IV

Which of the following statement 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 policyholder to switch to another variable life funds offered by the company.

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 premium 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.

• I and II

• I, II, and III

• I and III

• II and III

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.

• I, II andIII

• I and II

• I and III

• II and III

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?

• Participating endowment

• Variable life policies

• Participating whole life

• Anuities

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 a 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.

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

• IV, I, III, I

• III, I, IV, II

• II, I, IV, III

• II, IV, I, III

Which of the following best describes the benefits of variable life policies?

• The policy benefits are payable only on 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.

Investing in bonds offers the following advantage EXCEPT:

• It allows the investors a chance for capital preservation

• It is a place of temporary refuge when the investor foresees that the market outlook is uncertain

• It enables the investor an opportunity for capital appreciation

• It offers protection to the principal and guaranteed steady stream of income