IC VUL EXAM 2

Mr. Juan dela Cruz is currently earning P30,000 per 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?

• Participating endowment

• Variable life policies

• Participating whole life

• Annuities

What are the benefits available when investing in variable life funds?

I. The variable life funds offer policy holders an access to a pooled or diversified portfolios

II. The variable life policy holder can vary his premium payments, take premium holidays, add single premium top-ups and change the level of the sum assured easily.

III. The variable life policy holder can have access to a pool of qualified and trained professional fund managers.

• I and II

• I and III

• I, II and III

• II and III

Rank the following in terms of their liquidity, from the least liquid to the most liquid:

I. Short term securities

II. Property

III. Cash

IV. Equities

• IV, II, III, I

• III, I, IV, II

• II, I, IV, III

• II, IV, I, III

A unit trust is _______.

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

• A close-end fund and does not have to dispose of its assets if a large number of investors sell their shares

• One whereby investor buys units in the trust itself and not shares in the company

• An organization registered under the Securities and Exchange Commission (SEC) which

  usually invests in a wide range of equities and other investments.

Under variable life insurance policies

I. There is no guaranteed minimum sum assured for the purpose of declaring dividends

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

III. Each of the policy owner's premiums will be used to purchase units the number of which is dependent on the selling price of each unit.

IV. 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.

• I and IV

• II and IV

• III and IV

• II and III

The benefits of investing in variable funds include

I. Policy owners have access to pooled or diversified portfolios of investment

II. 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.

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

IV. Policy owners can buy a variable life insurance policy only with a high initial investment.

• I, II and IV

• I, III, and IV

• I, II and III

• II, III, and IV

Which of the following BEST describes the policy 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.

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

• Because the insurer does not guarantee any return.

• Because the impact of changes in investment or condition on a variable life policy is borne solely by the customer,

• Because the agent may give the wrong recommendations.

• Because the policy holders expect higher returns.

Which of the following statements about rebating are TRUE?

I. Rebating is prohibited under the Insurance Code.

II. Rebating deals with offering the prospect a special inducement to purchase a policy.

III. Rebating will enhance the sales performance and uphold the prestige of an agent.

• I and II

• I and III

• II and III

Which one of the following statements is FALSE?

• Variable life insurance policies offer investors policies with values that are indirectly linked to the investment performance of the life company.

• Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policy holders as cash dividends.

• Both whole life and endowment policies can be used as investment mediums with benefits that become payable at a future date.

• The investment element of variable life policies varies according to underlying assets of portfolio.