VUL Reviewer

Set 1

1. Variable life insurance policy owners may make their own withdrawals in terms of :
a. Number of units or fixed monetary amount through cancelation of units
b. Number of units or fixed monetary amount through reduction of the life cover 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 one of the following statements about flexibility features of variable life policies is false?
a. Policy holders may request for partial withdrawal of the policy and the withdrawal amount
will be met by cashing the units at the bid price
b. Policy holders can take loans against their variable life policies up to the entire withdrawal
value of their policies
c. Policy holders have flexibility of switching from one fund to another provided it satisfies the
company’s switching criteria
d. Policy holders have flexibility of increasing or decreasing their premiums for regular
premiums variable life policies
3. The investment returns under variable life insurance policy _________
I. Are not guaranteed
II. Area assured
III. Are linked to the performance of investment fund management by the life company
IV. Fluctuate according to the risk 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 are 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 than any outstanding loans due at the time of surrender
III. The life company needs to maintain a separate account for variable life policies distinct
from the general account
a. I and II
b. I,II and III
c. I and III
d. II and III
5. Which of the following statements is false?
a. Rebating is to offer a prosect with 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 policy holders to switch to another variable life funds offered
by the company
6. Which of the following statements about variable life policies are true?
I. Offer price is used to determine the number 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
a. I,ii and iii
b. I and ii
c. I and iii
d. Ii and 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 in investing in common shares?
i. Dividend are paid not more than the fixed rates
ii. Investors are exposed to markets and specific risks
iii. Shares become worthless if company becomes insolvent
a. I and ii
b. I and iii
c. Ii and iii
d. I, ii and iii
9. Which of the following statements about between the differences of 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 premiums and benefits of endowment policies are described at the 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 accure to the policy
holders.
a. I and ii
b. I, ii and iii
c. I and III
d. Ii and 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 inducing a policy holder to discontinue policy with another company
without disclosing the disadvantages of doing so
c. It includes misleading and incomplete comparison of policies
 d. It refers to an agent offering a prospect a special inducement to purchase a policy
11. Mr. Juan Dela Cruz is currently earning P30000/month. He is 35 years old and has a reasonable
amount of savings. He has a moderate level of rsk tolerance. What kind of policy would you
recommend for him to buy?
a. Participating endowment
b. Variable life policies
c. Participating whole life
d. Annuities
12. What are the benefits available when investing in variable life funds?
i. The variable life funds offer policy holders an access to pooled or diversified portfolios
ii. The variable life policy holders can vary his premium payments, take premium holidays,
add single premium top-ups and change the level of sum assured easily
iii. The variable life policy holder can have access to a pool of qualified and trained
professional fund managers
a. I and ii
b. I and iii
c. I ii a nd iii
d. Ii and iii
13. Rank the following in terms of their liquidity, from the least to the ost liquid:
i. Short term securities
ii. Property
iii. Cash
iv. Equities
a. Iv,ii,iii,i
b. Iii,I,iv,ii
c. Ii,I,iv,iii
d. Ii,iv,I,iii
14. A unit trust is__________
a. Establishd by a trust ded which enables a trustee to hold the pool of money and assets in
trust on behalf of the investor
b. A close-end fund and does not have to dispose off assets if large amount of investors sell
their shares
c. One whereby investor buys units in the trust itself and not shares in the company
d. An organization registered under the SECURITY AND EXCHANGE COMMISION (SEC) which
usually invests in a wide range of equities and other investments
15. Under variable life insurance policies ___________________
i. There is no guaranteed minimum sum assured for the purpose of declaring dividends
ii. There is not guaranteed minimum sum assured as a level of 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 nits can only be made from the variable life fund itself, which will then
create new units and investment monies to the value of the fund.
 a. I and iv
b. Ii and iv
c. Iii and iv
d. Ii and iii
16. 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 premium payments as the product as the
product design of the variable life insurance 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
a. I,ii and iv
b. I, iii and iv
c. I, ii and iii
d. ii, iii and iv
17. Which of the following best describes the policy benefit variable life policies?
a.The policy benefits are payable only upon death or disability
b.The policy benefits will depened on the long-term performance of the life
company
c. The policy benefits are linked to the investment performance of the
underlying assets
d.The policy benefits are guaranteed
18. Why is it important that the customer must understand the sales proposal in full?
a.Because the insurer does not guarantee any return
b.Because the impact of changes in investment condition on variable life policies
borne solely by the customer
c. Because the agent may give the wrong recommendation
d.Because the policy holder expect higher return
19. Which of the following statement about “Rebating” is 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
a. I and ii
b.I and iii
c. Ii and ii
20. Which of the following statement is false?
a.Variable life insurance policies offer investors policies with values and
indirectly linked to the investment of the life company
b.Life company will carry out a valuation of its funds yearly and any surplus may
be allocated to participating policy holders a cash dividends
 c. Both whole life and endowment policies can be used in full, after deducting
charges from top-ups, to purchase additional units of the variable life funds
d.The investment element of the variable life policies varies accoirding to
underlying assets of the portfolio
21. Which of the following statements about option to top-up under variable life insurance products
is false?
a.Policy owners may buy additional units of the variable life fund and these
units will be allocated to new variable life insurance policies
b.Further premiums at the time of top-up will be used in full, after deducting
charges for top-ups to purchase additional units of the variable life funds
c. To top-up a policy, the policy owner pays further single premium at the time of
top-up
d.Policy owners are normally allowed to top-up their policies at any time, subject
to a minimum amount
22. The characteristics of a variable life insurance policy 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 moths notice given by the life companies prior to any change
iv. It withdrawal value is normally the normal value of units allocated to the polcy owner
calculated at the bid price
a.I, ii and iii
b.Ii, iii and iv
c. I, ii and iv
d.I, ii and iv
23. Which of the following statements about single premium variable life insurance policies are
true?
i. There is no fixed term in a single premium variable life policy therefore, they are
technically whole life insurance
ii. Top-ups ore single premium injections are allowed in these plans
iii. Policy holders have the flexibility of varying the level cover
a.I, ii and iii
b.Ii and iii
c. I and ii
d.I and iii
24. Investing in bonds offer the following advantages except
a.It offers protection to the principal and guaranteed stream of income
b.It is a place of temporary refuge when the investor foresees that the market
outlook is uncertain
c. It allows the investors a chance for capital preservations
d.It enables the investors opportunity for capital appreciation
25. 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 fund
iii. The variable life policy holder has direct control over the investment decisions of the
variable life funds
a.I, ii and iii
b.I and ii
c. I and iii
d.Ii and iii
26. Single premium variable life insurance policy
a.Must be issued with a maximum death benefit
b.Must be issued with a maximum withdrawal value
c. Has no death benefit
d.Has no withdrawal value
27. Which of the following statements about the characteristics of variable life policies are true?
i. Variable life policies generally have a larger exposure to equity investment than with a
participating and other traditional policies
ii. The protection costs are generally met by implicit charges, which vary with age and
level of cover
iii. Commission and company expenses are met by a variety of explicit charges, some of
which are variable
a.I, ii and iii
b.I and ii
c. Ii and iii
d.I and iii
28. Which of the following statements about benefits in variable life fund is false?
a.The fund provides a hghly diversified portfolio, thus, lowering the risk of
investment
b.The fund ensures definite high yield for an investor since it is managed by
professionals who are well versed in the management of the risk of
investment portfolios
c. The fund relieves investors from the hassle of administering his/her investment
d.The fund enable small investors to participate in a pool of diversified potfolio on
which he/she, with low investment capital, is likely to have acceded to.
29. The flexibility benefit of investing in variable life funds include ________
i. Policy owners can easily change the level of sum assured and switch after their
investments between funds
ii. Policy owners can i=easily take premium holidays and add single premium top-ups
iii. Variable life insurance products have a simple product design with a clear structure
which cater separately for investment and insurance protection
iv. Policy owners can easily change the level of their premium payment
a.All of the above
 b.I, ii and iii
c. I, ii and iv
d.I, ii and iv
30. The fundamental differences between traditional participating life policies and variable life
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 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
a.I, iii and iv
b.Ii, iii and iv
c. I, ii and iii
d.I, ii and iv
31. The switching facilities under variable life insurance policies is a very useful ____________
a.For the purpose of profit planning by the life policies
b.For the purpose of assets planning by the trustee
c. For the purpose of sales planning by the fund managers
d.For the purpose of financial planning by the policy owners
32. The following statement of the surrender value under traditional participating life insurance
products is true?
a. Cash value is paid when a yearly renewable term insurance policy is
surrendered
b.When a participating insurance policy is surrendered, the surrender value is
calculated by multiplying the bid price with the number of units
c. 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
d.In the case of participating policies, the net cash surrender value includes the
surrender value of the paid up additions up to the date of surrender
33. Which of the following statement about the risk of investing in variable life funds is true?
a.A policy owner who is risk averse should buy variable life insurance policies
with high equity investments
b.Investments in variable life funds which are fully invested in units of equity
bonds are not suitable for policy owners who can tolerate the risk of short –
term fluctuation in their cash value
c. Policy owners who invest in variable life funds with high equity investment
face greater risk but expect to achieve higher return than the traditional life
product over the long term
 d.Policy owners who are risk averse should not purchase life insurance policies
with high protection and guaranteed cash and maturity values.
34. What would be the withdrawal value after a year?

Offer price = Php 16.00

Bid-offer spread = 4.5%

Number of units bought = 25,000

Policy fee = 1800

Admin and Mortality charge = 8750

Top-up fee = 700

Admin for top-up = 2000

Sum assured is 190% of single premium or the value of the units, whichever is higher.

Assumptions:

1.Charges and fees are deducted after the single premium has been invested into the account

2. the growth rate of the unit price and the bid offer spread is maintained at 8% and 4.5%
respectively

a. P 432,000.00

b. P 420,000.02

c. P 401,107.58

d. P 412,500.00

35. The protection costs under a variable life insurance policy ________________
i. Are met by a flat initial charges for regular premium plans
ii. Are generally cover 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
a.I, ii and iii
b.I, ii and iv
c. I, ii and iv
d.Ii, iii and iv
36. Which one of the following statements about diversification in portfolio management is false?
 a.A diversified portfolio provides greater security to an averse investor having to
sacrifice the return for the portfolio
b.Diversification can completely eliminate the risk of investing in stocks in a
portfolio
c. Diversification can involve purchasing different kind of stocks and investing in
stocks of different country
d.Diversification helps to spread the portfolio risk by investing in different
categories of investment in a portfolio
37. 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 dissolution
iii. They enjoy benefit capital appreciation
a.I, ii and iii
b.I and ii
c. I and iii
d.Ii and iii
38. With traditional life insurance products, the allocation to policy owners in the form of dividends
________
i. Are not directly linked to the life company’s investment performance
ii. Have aready been smoothened by the life company
iii. Do not have highs and lows of investment returns as in good investment years of life
company
iv. Are not fixed at inception of policy, but are greatly dependent on the investment
performance of the life company
a.I, ii and iii
b.I, ii and iv
c. I, ii and iv
d.Ii, iii and iv
39. The objective of satisfying customers need profitably can be achieved by an 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, strategic and objectives are coordinated with
market analysis, segmentation and targeting
iv. The giving of monetary assistance and discount to customers
a. I and ii
b.Ii and iii
c. I, ii and iv
d.Ii, iii, and iv
40. Which of the following statements is true about cash?
a.It has high yield potential
b.Amount invested in each cash depends n the size of each cash flow
requirement
 c. Investment in cash increase when there is run in the stock market
d.Investment in cash decreases when interest rates rise
41. Under a regular premium variable whole life insurance plan________________
i. Premium top-ups and holidays, subject to the life company’s administrative rules are
usually allowed
ii. Life protection is the main objective of the plan with investment as a nominal purpose
iii. Withdrawal after a 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 variable life fund and to provide certain level of life cover
a.Ii,ii and iv
b.I, ii and iv
c. I, ii and iv
d.I, ii and iii
42. Which of the following statements about investment objectives is false?
a.People invest money in fixed deposits to produce high and guaranteed returns
b.People invest money to enhance a comfortable standard of living
c. People invest money to provide funds for higher education for their children
d.Investment in commodities have no regular income
43. Which of the following is/are the main characteristic(s) of variable life policies?
i. The policies can be used for investment, as a source of regular savings and protection
ii. The withdrawal values and protection benefits are determined by the investment
performance of the underlying assets
iii. The net cash values of the policies are the gross cash values shown in the policy that
include dividends up to the date of surrender, less any indebtedness including interest
a.Ii
b.I
c. I,ii and iii
d.I and ii
44. 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 matchng 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
a.I and iii
b.I and ii
c. Iii and iv
d.Ii and iv
45. The duties of a trustee of unit trust do not include:
a.Managing the portfolio of investment and administering the buying and selling
of shares in the unit trust itself
 b.Ensuring the fund manager adhere to the provision of the trust deeds
c. Acting generally to protect the unit holders
d.Holding the pool of money and assets in trust in behalf of the investors
46. Policy fee payable by variable life insurance policy owner is to cover ________________
a.The handling charges by professionl investment managers
b.The price for each unit under the variable life insurance policy
c. The mortality costs of the variable life insurance policy
d.The administrative expenses of setting up the variable life insurance policy
47. The selling price under a variable life insurance policy is:
a.The price which units the policy are bought back by the life company
b.The price of which units under the policy are offered for sale by the life
company
c. Also known as bid price
d.A fixed amount throughout the life of the policy
48. In risk return profile of cash funds, bods 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
a.I, ii and iii
b.Ii, iii and iv
c. I, ii and iv
d.I, iii and iv
49. Diversification in investment involves _____________________
a.Putting all the funds under management into one category of investment
b.Spreading the risks of investment by not putting the fund into several categories
investment
c. Reducing the risks of investment by putting one fund under management into
several categories of investment
d.Reducing the risks of investment ny putting all one’s egg in one basket
50. 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_____________
a.Invest in shares of stocks and the magnitude of the change in unit prices will
only depend on the quantity of the equities held
b.Invest in shares of stocks and during market recession, such assets are usually
the last depreciate
c. Invest in shares of stocks which are inherently of lower risk in nature and the
prices of stocks are stable
d.Invest in shares of stocks and investor who buys such assets usually aims for
capital appreciation.