sunlife vul insurance

Question 1

1. Which of the following statements about option to top-up under variable life insurance products is TRUE?
   I. Policy owners may buy additional units of the variable life fund and these units will be allocated to
   new variable life insurance policies.
   II. Further premiums at time of top-up will be used in full, after deducting charges for top-ups, to
   purchase additional units of the variable life funds.
   III. To top-up a policy, the policy owner pays further single premium at the time of top-up.
   IV. Policy owners are normally allowed to top-up their policies at any time, subject to a minimum
   amount
   a. II, III, and IV
   b. I, II, and III
   c. I, II, and IV
   d. I, III, and IV

Answer 1

a. II, III, and IV

Question 2

2. What are the disadvantages when investing in common shares?
   I. Dividends are paid not more than fixed rates.
   II. Investors are exposed to market and specific risks.
   III. Shares can become worthless if company becomes insolvent.
   a. I, and II
   b. I, and III
   c. II, and III
   d. I, III, and III

Answer 2

c. II, and III

Question 3

3. Which of the following statements about the 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 cashing the units at bid price.
   b. Policyholders can take loans against their variable life policies up to the entire withdrawal value of
   their policies.
   c. Policyholders have the 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 premiums
   variable life policies.

Answer 3

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

Question 4

4. What is the most suitable investment instrument for someone who is interested in protecting his
   principal, while receiving a steady stream of income?
   a. Equities
   b. Warrants
   c. Variable Life Policies
   d. Fixed Income Securities

Answer 4

d. Fixed Income Securities

Question 5

5. A unit trust is ____.
   a. Established by a trust deed, 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 of its assets if a large number of investors sell their
   shares.
   c. One whereby an investor buys units in the trust itself and not shares in the company.
   d. An organization registered under the Securities and Exchange Commission (SEC) which usually
   invests in a wide range of equities and other investments.

Answer 5

a. Established by a trust deed, which enables a trustee to hold the pool of money and assets in trust
on behalf of the investor.

Question 7

7. Which of the following statements are FALSE?
   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 values plus any accumulated dividends less any
   outstanding loans due at time of surrender.
   III. The life company needs to maintain a separate account for variable life policies distinct from the
   general account.
   a. II and III
   b. I, II, and III
   c. I and III
   d. I

Answer 7

d. I

Question 8

8. Variable life insurance policy owners may withdraw in terms of ____.
   a. Number of units or fixed monetary amount through cancellation of units.
   b. Number of units or fixed monetary amount though 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.

Answer 8

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

Question 9

9. An investor in variable life funds gets to enjoy these benefits:
   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.
   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

Answer 9

c. I, II, and III

Question 10

10. Which of the following about rebating is FALSE?
    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 III
    d. III

Answer 10

d. III

Question 11

10. Which of the following about rebating is FALSE?
    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 III
    d. III

Answer 11

d. III

Question 12

11. Which of the following statements is FALSE?
    a. Variable life insurance policies offer investors plans with values that are indirectly linked to the
    investment performance of the life company.
    b. A life insurance company will carry out a valuation of its funds yearly and any surplus may be
    allocated to participating policyholders as cash dividends.
    c. Both Whole Life and Endowment policies can be used as an investment media with benefits that
    become payable at a future date.
    d. The investment element of variable life policies varies according to underlying assets of portfolio.

Answer 12

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

Question 13

12. Which of the following statements about single premium variable life policy are TRUE?
    I. There is no fixed term in a single premium variable life policy, and therefore, they are technically
    whole life insurance.
    II. Top-up single premium injections are allowed in these plans.
    III. Policyholders 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

Answer 13

b. II and III

Question 14

13. Which of the following statements about variable life policies are TRUE?
    I. The cash withdrawal value is not guaranteed.
    II. The volatility of the returns depends on the investment strategy of the fund.
    III. The variable life policyholder has direct control over the investment decisions of the variable life
    fund.
    a. I, II, and III
    b. I and II
    c. I and III
    d. II and III

Answer 14

b. I and II

Question 15

14. Which of the following statements about variable life policies are TRUE?
    I. Variable life policies generally have larger exposure to equity investment that 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. Commissions 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

Answer 15

d. I and III

Question 16

15. The facility to do switching under a variable life insurance policy 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

Answer 16

d. For the purpose of financial planning by the policy owners

Question 17

16. The flexibility of investing in variable life funds includes these benefits:
    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 add single premium to top-ups.
    III. Variable life insurance products have a single 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, III, and IV

Answer 17

c. I, II, and IV

Question 18

17. Which of the following statements about risks of investing in variable life funds is TRUE?
    a. Policy owners who are risk averse should buy variable life insurance policies with high equity
    investment.
    b. Investment in variable life funds, which are fully invested in units of equity bonds, are not suitable
    for policy owners who are can tolerate the risks of short-term fluctuations in their cash value.
    c. Policy owners who invest in variable life funds with high equity investment face greater risk but
    can expect to achieve higher return than the traditional life insurance product over the long term.
    d. Policy owner who are risk averse should not purchase life insurance policies with high protection
    and guaranteed cash and maturity values.

Answer 18

c. Policy owners who invest in variable life funds with high equity investment face greater risk but
can expect to achieve higher return than the traditional life insurance product over the long term.

Question 19

18. What would be the withdrawal value after a year?
    Offer price = Ps 16.00
    Bid-offer spread = 4.5%
    Number of Units bought = 25,000 units
    Policy Fee = Ps. 1,800
    Admin and Mortality Charge = Ps. 8,750
    Top-Up Fee = Ps. 700
    Admin for Top-Up = Ps. 2,000
    Sum assured is 190% of single premium of the value of the units, whichever is higher.
    Assumptions:
19. Charges and fees are deducted after the single premium has been invested into the account.
20. The growth rate of the unit price and the bid-offer spread is maintained at 8% and 4.5% respectively.
    a. Ps. 432,000.00
    b. Ps. 420,069.02
    c. Ps. 401,107.58
    d. Ps. 412,500.00

Answer 19

c. Ps. 401,107.58

Question 20

19. Which of the following statements about an investor diversifying his portfolio is FALSE?
    a. A diversified portfolio provides greater security to an investor having to sacrifice the return for the
    portfolio.
    b. A diversified portfolio can completely eliminate the risk of investing the stocks in a portfolio.
    c. A diversified portfolio can involve purchasing different types of stocks and investing in stocks of
    different countries.

Answer 20

b. A diversified portfolio can completely eliminate the risk of investing the stocks in a portfolio.

Question 21

20. In traditional life insurance products, the allocations to policy owners in the form of dividends ____.
    I. Are not directly linked to the life company’s investment performance
    II. Have already been smoothened by the life company
    III. Do not have the highs and lows of investment returns as in good investment years of the life
    company
    IV. Are not fixed at the inception of the 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, III, and IV
    d. II, III, and IV

Answer 21

d. II, III, and IV

Question 22

21. Which of the following statements is TRUE about cash?
    a. It has high yield potential.
    b. Amount invested in cash depends on the size of the cash flow requirement.
    c. Investment in cash increases when there is a bull run in the stock market.
    d. Investment in cash decreases when interest rates rise.

Answer 22

b. Amount invested in cash depends on the size of the cash flow requirement.

Question 23

22. Which of the following are main characteristics of variable life policies?
    I. The policies can be used, 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 includes
    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

Answer 23

d. I and II

Question 24

23. Which of the following duties of the trustees are FALSE?
    a. Managing the portfolio of investment and administering the buying and selling of shares in the
    unit trust itself
    b. Ensuring that the fund manager adhere to the provision of trusts deeds
    c. Acting generally to protect the unit-holders
    d. Holding the pool of money and assets in trust in behalf of the investors

Answer 24

a. Managing the portfolio of investment and administering the buying and selling of shares in the
unit trust itself

Question 25

24. The policy fee payable by a variable life insurance policy owner is to cover ____. a. The handling charges by professional investment managers b. The prices for each unit bought 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

Answer 25

d. The administrative expenses of setting up the variable life insurance policy

Question 26

25. In risk-return profile of bond funds, cash funds, managed funds, balanced 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

Answer 26

b. II, III, and IV

Question 27

26. Variable life funds can be invested in any financial instruments including bond funds, property funds, specialized funds, and equity 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 to depreciate c. Invest in share of stocks which are inherently of lower risk in nature and the prices of stocks are stable d. Invest in share of stocks and investor who buys such assets usually aims for capital appreciation

Answer 27

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

Question 28

27. 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 a. I, II, and III b. I, II, and IV c. I, III, and IV d. II, III, and IV

Answer 28

c. I, III, and IV

Question 29

28. 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 policyholder to switch to another variable life funds offered by the company.

Answer 29

c. Misrepresentation is a specific form of twisting.

Question 30

29. 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 premiums 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. a. I and II b. I, II, and III c. I and III d. II and III

Answer 30

c. I and III

Question 31

30. 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. a. I, II, and III b. I and II c. I and III d. II and III

Answer 31

d. II and III

Question 32

31. 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? a. Participating endowment b. Variable life policies c. Participating whole life d. Annuities

Answer 32

b. Variable life policies

Question 33

32. Which of the following statements about twisting are TRUE? I. Twisting is a special form of misrepresentation. II. It refers to an agent inducing a policyholder to discontinue a policy with another company without disclosing the disadvantage of doing so. III. It includes misleading or incomplete comparison of policies. IV. It refers to an agent offering a prospect a special inducement to purchase a policy. a. I and IV b. III and IV c. II, III, and IV d. I, II, and III

Answer 33

d. I, II, and III

Question 34

33. 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 a. IV, I, III, I b. III, I, IV, II c. II, I, IV, III d. II, IV, I, III

Answer 34

d. II, IV, I, III

Question 35

34. Which of the following best describes the benefits of variable life policies? a. The policy benefits are payable only on death or disability. b. The policy benefits will depend on the long-term performance of the life company. c. The policy benefits are directly linked to the investment performance of the underlying assets. d. The policy benefits are guaranteed.

Answer 35

c. The policy benefits are directly linked to the investment performance of the underlying assets.

Question 36

35. Investing in bonds offer the following advantages with the exception of ____. a. Offering protection to the principal and guaranteed steady stream of income. b. Being a place of temporary refuge when the investor foresees that the market outlook is uncertain. c. Allowing the investor a chance for capital preservation. d. Enabling the investors an opportunity for capital appreciation.

Answer 36

d. Enabling the investors an opportunity for capital appreciation.

Question 37

36. Which of the following statements about benefits in a variable life fund is FALSE? a. The fund provides a highly diversified portfolio, thus, lowering the risk of investment. b. The fund ensures definite high yield for the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios. c. The fund relieves investor from the hassle of administering his/her investment. d. The fund enable small investor to participate in a pool of diversified portfolio in which he/she with low investment capital is likely to have acceded to.

Answer 37

b. The fund ensures definite high yield for the investor since it is managed by professionals who are well versed in the management of risks of investment portfolios.