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WorksheetsTest
Total questions: 58
Worksheet time: 29mins
Variable life insurance policy owners may make withdrawals in terms of .
Number of units or fixed monetary amount through cancellation of units
Number of units of fixed monetary through reduction of the life cover sum assured
Fixed monetary amount only through reduction of the life cover sum assured
Number of units through cancellation of units.
Which of the following statements about flexibility features of the variable life policies is false?
Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met cashing the units at the bid price
Policyholders can take loans against their variable life up to the entire withdrawal value of their policies
Policyholders have the flexibility of switching from one find to another provided it satisfies the company’s switching criteria
Policyholders have the flexibility of increasing or decreasing their premiums for regular premium variable life policies
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
I,II AND III
I,II AND IV
I,III AND IV
II,III AND IV
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
I & II
I,II & III
I & II
II,III
Which of the following statements is FALSE?
Rebating is to offer a prospect a special inducement to purchase a policy
Twisting specific form of misrepresentation
Misrepresentation is a specific form of twisting
Switching is a facility allowing the policyholders to switch to another variable life funds offered by the company.
Which of the following statements about 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 management cost of the policy
III. The policy value calculated based on the bid price of units allocated into the policy
I,II,III
I,II
I,III
II,III
What is the most suitable investment instrument for investors who are interested in protecting his principal and receiving a steady stream of income?
Equities
Warrants
Variable life policies
Fixes income securities
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
I,II
III
II,III
I,II,III
Which of the following statements about the difference between variable life policies and endowment policies are FALSE?
I. The policies values of variable 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 is flexible as they are account driven.
III.The benefits and risks of variable life and endowment policies directly accrue to the policyholders.
I,II
I,II,III
I,III
II,III
Which of the following statements about twisting is FALSE?
Twisting is a special form of misrepresentation
It refers to an agent persuading 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
Mr. Juan dela Cruz is currently earning Php 30,000.00 per month. He is 35 years old and he 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 funds?
I. The variable life funds offer policyholder an access to pooled-or-diversified portfolios
II. The variable life policyholders can vary his premium payments, take premium holidays, add single premium top-ups and change level of the sum assured easily
III. The variable life policyholder can have access to pool of qualified and trained professional fund managers
I,II
I,III
I,II,III
II,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 a trustee to hold’ the pool of money and assets in trust in behalf of the investor
A close-end fund and does not have to dispose off if the large number investors sell their shares
One whereby the investors buys units in the trust itself and not share in the company
An organization registered under the SECURITY EXCHANGE COMMISSION (SEC) which usually invests in a wide range of equities and other investment
Under variable life: 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 premium 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 investment monies to the value of the fund.
I,IV
II,IV
III,IV
II,III
The benefits of investing in variable life 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 policies have clear structures which cater separately for investment and insurance protection
III. 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,IV
I,III,IV
I,II,III
II,III,IV
Which of the following BEST describes the policy benefits of 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 the changes in investment condition on variable life policy is borne solely by the costumer
Because the agent may give the wrong recommendations
Because the policyholder expects 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, II
I,III
II,III
Which one of the following statements is FALSE?
Variable life insurance policies offer investors policies with values and 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 policyholder 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 of variable life policies varies according to underlying assets of the portfolio
Which of the following statements about option top-up under variable life insurance 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 the top-up will be used in full, after deducting charges for top-ups, to purchase additional units of the variable life funds
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 of variable life policies varies according to underlying assets of portfolio
The characteristics of a variable life insurance include
I. Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets
II. Its protection costs are generally met by implicit charges
III. Its commission and company expenses are met by a variety of explicit charges with normally 6 months’ notice given by the life companies prior to any change
IV. Its withdrawal value is normally the value of units allocated to the policy owner calculated at the bid price
I, II & III
II, III & IV
I, II & IV
I, III & IV
Which of the following statements about single premium variable life policies are TRUE?
I. There is no fixed-term in a single premium variable life policy and therefore, lit is technically a whole life insurance
II. Top-ups or single premium injections are allowed in these plans
III. Policyholders have the flexibility of varying the level cover
I, II & III
II & III
I & II
I & III
Investing in bonds offer the following EXCEPT?
Must be issued with a minimum death benefit
Must be issued with a maximum withdrawal value
It allows the investor a chance for capital preservation
It enables the investor an opportunity for capital appreciation
Which of the following statements about variable life policies are TRUE?
I. The withdrawal value is not guaranteed
II. The volatility of the returns depends on the investment strategy of the funds
III. The variable life policyholder has direct control over the investment decision of the variable life funds
I, II & III
I &II
I &III
II & III
Single premium variable life insurance policy:
Must be issued with a minimum death benefit
Must be issued with a maximum withdrawal value’
Has no death benefit
Has no withdrawal value
Which of the following statements about characteristics of variable life policies are TRUE?
I. Variable policies generally have a linger exposure to equity investment than with participating and other traditional policies
II. The protection costs are generally met by implicit charges, which vary with age and level of cover
III. The commission and company expenses are met by a variety of explicit charges, some of which are variable.
I, II & III
I & II
II & III
I & III
Which of the following statements about benefits in variable life funds 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 risk of investment portfolios
The funds relieve the investors from the hassle of administrating his/her investment
The fund enables small investors to participate in a pool of diversified portfolio in which he/she, with a low investment capital, is likely to have acceded to.
The flexibility benefits of investing in variable life funds include_
I. Policy owners can easily change the level of sum assured and switch their investment between funds
II. Policy owners can easily take premium holidays and single premium to top-ups
III. Variable life insurance policies offer the potential for higher returns
IV. Traditional participating policies aim to produce a steady return by smoothing out market fluctuation
All of the above
I, II & III
I, II & IV
I, III & IV
The fundamental differences between traditional participating life insurance policies and variable life insurance policies include .
I. Variable life insurance policies are less likely to offer more choices in terms of the type of investment funds
II. The investment elements of variable life insurance policies is made known to the policy owner at the outset and is invested in a separately identifiable fund which is made up of units of investment
III. Variable life insurance policies offer the potential for higher returns
IV. Traditional participating policies aim to produce a steady return by smoothing out market fluctuation
I, III & IV
II, III & IV
I, II, & III
I, II, & IV
The switching facility under variable life insurance policies is very useful .
For the purpose of profit planning by the life policies
For the purpose of assets planning by the trustee
For the purpose of sales planning by the fund managers
For the purpose of financial planning by the policy owners
Which of the following statements about surrender value under traditional participating life insurance products are TRUE?
Cash value is paid when yearly renewable term insurance policy is surrender
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
Which one of the following statements about risks of investing in variable life funds is TRUE?
Policy owners who are risk averse should buy life insurance policies with high equity investment
Investment in variable life funds which are fully invested in units of equity bonds are not suitable for policy owners who can tolerate the risks of short term fluctuation in their cash value
Policy owners who invest in variable life funds with high equity investment face higher risk but can expect to achieve higher return than the traditional life insurance product over the long term
Policy owners who are risk averse should not purchase life insurance policies with high protection and guaranteed cash and maturity values
What should be the withdrawal values after a year?
Offer Price Php 16 Policy fee 1,800
Bid-offer Spread 4.5% | Admin and Mortality Charge 8,750
Number of units bought 25,000 | Top-up Fee Admin for Top-Up 700
Sum assured is 190% of single premium or the value of units, whichever is higher
ASSUMPTIONS
1. Charges and fees are deducted after the single premium has been invested into the account
2. The growth of the unit price and bid-offer spread is maintained at 8% and 4.5% respectively.
Php. 432,000.00
Php. 420,069.20
Php. 401,107.00
Php. 412,500.00
The protection cost under a variable life insurance policy .
I. Are met by flat initial charges for regular premium plans
II. Are generally covered by cancellation of units in the fund
III. Are generally met by explicit charges stipulated openly in the policy terms
IV. Vary with age of policy owner and level of cover
I, II & III
I, II & IV
I, III, & IV
II, III, & IV
Which of the following statements about diversification in portfolio management is FALSE?
A diversified portfolio provides greater security to an investor having to sacrifice return for the portfolio
Diversification can completely eliminate the risk of investing in stocks in portfolio
Diversification can involve purchasing different types of stocks and investing stocks in different countries
Diversification helps to spread the portfolio risk by investing in different categories of investment in a portfolio
What are the advantages of investing in preferred shares?
I. It gives shareholders the right to affixed dividend
II. Has the priority over company assets during a dissolution
III. They enjoy benefit of capital appreciation
I, II & III
I & II
I & III
II & III
With traditional participating life insurance products, the allocations to policy owners in the form of dividends .
I. Are not directly linked to the company’s investment performance
II. Have already been smoothed by the life company
III. Do not have the highs and lows of investment return as in good investment years of life company
IV. Are not fixed at the inception of the policy, but are greatly dependent on the investment performance of the company
I, II & III
I, II & IV
I, III& IV
II, III& IV
The objective of satisfying customers need profitably can be achieved by and agent through
I. The giving of freebies to the customers
II. Extensive investment training by the company
III. The use of sales plan, where sales goals, strategies, and objectives are coordinated with the market analysis, segmentation and training
IV. The giving of monetary assistance and discount to the customers
I,III
II,III
II,IV
II,III,IV
Which of the statements is true about CASH?
It has a high yield potential
Amount invested cash depends on size of the cash flow requirement
Investment in cash increase when there is a bull run in the stock market
Investment in cash decrease when interest rates rise
Under a regular premium variable whole life plan_
I. Premium top-ups and holidays, subject to the company’s administrative rules are usually allowed
II. Life protection is the main objective of the plan with investment as the nominal purpose
III. Withdrawals after the payment of a few years’ premium are usually allowed
IV. A single premium contribution is made to the policy which uses the premium to purchase units in a variable life fund to provide a certain level of life cover
II,III,IV
I,III,IV
I,II,IV
I,II,III
Which of the following statement about investment objectives is false?
People invest money in fixed deposits to produce high and guaranteed returns
People invest money to enhance a comfortable standard of living
People invest money to provide funds for higher education for their children
IV. Investment in commodities has no regular incom
Investment in commodities has no regular income
Which of the following is/are the main characteristic(s) of variable life policies?
I. The policies can be used for investments, as a source of regular savings and protection
II. The withdrawal values and protection benefits are determined by the investment
III. The net cash values of the policies are the gross cash values shown in the policy that includes dividends up to the date of surrender less and indebtedness including interest
II
I
I, II,III
I,II
Risk can be classified into two particular categories in relation to investment. They include_
I. The risk of not losing some or all of the 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 expectation
IV. The risk of losing some or all of a person’s initial investment
I,III
I,II
III,IV
II,IV
The duties of the trustee of unit do not include:
Managing the portfolio or investment and administrating the buying and selling of shares in the unit trust itself
Ensuring that the fund manager adheres to the provision of the trust deeds
Acting generally to protect the unit holders
Holding the proof of money and assets in trust in behalf of the investors
Policy fee payable by variable life insurance policy owner is to cover_
The handling charges by professional investment managers
The price of each unit bought under the variable life insurance policy
The mortality costs of 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
The price at which units under the policy are bought back by the life insurance company
The price at which units under the policy are offered for sale by the life company
Also known as the bid price
A fixed amount throughout the life of the policy
Diversification in investment involves_
Putting all the funds under management into one category of investment
Spreading the risks of the investment by not putting the fund into several categories of investment
Reducing the risks of investment by putting one fund under management into several categories of investment
Reducing the risks of investing by putting all one’s eggs in one basket
Variable life funds can be invested in any financial instruments including cash funds, bond funds, equity funds, property funds, specialized funds, and diversified 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 as assets are usually the last to depreciate
Invest in shares of stocks which are inherently of lower risk in nature and the prices of stocks are stable
Invest in shares of stocks and investors who buy such assets usually aim for capital appreciation
Which of the following statement describe the difference between variable life products and participating products?
I. Variable life products allow policyholders to vary the premium payment unlike participating products
II. Variable life products can take the form of whole life or endowment policies with participating products
III. Variable life products allow policyholders to pay future single premium from the time to time to add more units to his account unlike participating products
I, II,III
I
I,III
II,III
Assuming no movement in the prices and charges/ fees are deducted after the single premium has been invested into the account, how much will the policyholder lose if he surrenders the policy now?
Bid Price Ps. 13.00 | Bid-offer spread 4%
Single Premium Ps. 450,000 | Policy Fee Ps. 1800
Admin and mortality charges 3%
Sum assured is 200% of single premium of the value of the units, which is higher
Ps. 43,400.90
Ps. 33,246.78
Ps. 22,500.00
Ps. 15, 299.96
Which of the following statements BEST describes ‘variable life’ policies?
It is fixed premium policy with returns that will not vary with the underlying value of investments.
It is fixed premium policy with returns that will vary with the underlying value of investments.
It is a flexible premium policy with returns that will not vary with the underlying value of investments.
It is a flexible premium policy with returns that will vary with the underlying value of investments.
Which of the following factors contribute to the specific risk of an investment
I. Rate of corporate taxers
II. Fraud by senior management
III. Financial leverage of the company
I, II
II,III
I,III
I,II,III
Investing in bonds offers the following advantages EXCEPT.
It offers protection to the principal and guaranteed steady of income
It is a place of temporary refuge when the investor foresees that the market outlook is uncertain
It allows the investors a chance for Capital preservation
It enables the investors an opportunity for capital appreciation
Rank the following investment instruments in terms of their level of risks, from the least risky to the most risky.
I. Cash and deposit
II. Derivatives
III. A well-diversified investment portfolio of a company
IV. Stock options
I,IV,III,II
I,III,IV,II
I,IV,II,III
I,II,III,IV
In risk return profile of cash funds, bond funds, balanced funds, managed funds and equity funds, a risk return graph will show that
I. Higher return normally comes with lower risk
II. Higher return normally comes with higher risk
III. At the top end of the graph are the equity funds
IV. The relatively risk-less cash funds sit at the bottom end of the graph
I,II,III
II,III,IV
I,II,IV
I,III,IV
Which of the following statement are TRUE?
I. The policy value of variable life policies is determined by the offer 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 surrender.
III. The life company needs to maintain a separate accounts for variable life policies distinct from the general account.
I,II
I,II,III
I,III
II,III
Which of the following information is NOT required to be disclosed to policyholders of variable life policies?
The net withdrawal value as of the statement date.
The premiums received and charges levied during the period
The basis and frequency for valuing the assets.
Number and value of units held at the beginning of the period; bought and sold during the period and held at the end of the period.
