MOCK EXAM

Variable life insurance policy owners may make withdrawals in terms of________.

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

• b. Number of units of fixed monetary through reduction of the life covers 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 flexibility features of variable life policies is false?

• a. Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met by chasing the units at the bid price

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

• c. Policyholders can take loans flexibility of switching from one fund to another provided it satisfies the company’s switching criteria

• d. Policyholders have the flexibility of increasing or decreasing their premiums for regular premium variable life policies

3. The investment returns under variable life insurance policy________

I.Are not guaranteed

II.Are assured

III.Are linked to the performance to of the investment fund managed by the life insurance company

IV.Fluctuate according to the rise and fall of market prices

• 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 is TRUE?

I.The policy value of variable life policies is determined by the offer price at the time of valuation

II.The policy value of endowment policies is the cash value plus any accumulated dividends less any outstanding loans due at the time of the surrender

III.The life company needs to maintain a separate account for variable life policies distinct from the general account

• a. I & II

• b. I, II, & III

• c. I & III

• d. II & III

5. Which of the following statements is FALSE?

• a. Rebating is to offer a prospect a special inducement to purchase a policy

• b. Twisting is a specific form of misrepresentation

• c. Misrepresentation is a specific form of twisting

• d. Switching is a facility allowing the policyholders to switch to another variable life funds offered by the company

6. Which of the following statements about variable life policies is TRUE?

I. Offer price is used to determine the number of units to be credited to the account

II.The margin between the bid and offer price is used to cover the managements cost of the policy

III.The policy value is calculated based on the bid price of units allocated into the policy

• a. I, II & III

• b. I & II

• c. I & III

• d. II & 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. Equities

• b. Warrants

• c. Variable life policies

• d. Fixed income securities

8. What are the disadvantages of investing in common shares?

I.Dividends are paid more than fixed rates

II.Investors are exposed to market and specific risks

III.Shares can become worthless if company becomes insolvent

• a. I & II

• b. I & III

• c. II & III

• d. I, II & III

9. Which of the following statements about the difference between variable life policies and endowment policies are FALSE?

I. The policy values of variables life policies directly reflect the performance of the fund of the life company

II.The premiums and benefits of the endowment policies are described at the inception of the policy whereas variable life are flexible as the are account driven

III.The benefits and risks of variable life and endowment policies directly accrue to the policyholders

• a. I & II

• b. I, II & III

• c. I & III

• d. II & III

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

• a. Twisting is a special form of misrepresentation

• b. It refers to an agent including a policyholder 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