UL REVIEW

DIRECTION: Choose the correct answer. Indicate your answer by marking

the appropriate parenthesis on the answer sheet with an X.

1. Variable life insurance policy owners may make withdrawals in term of

____________

a. Number of units or fixed monetary amount through cancellation 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 of the following statements about flexibility features of variable

life policies is false?

a. Policy holders 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 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 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 of the investment fund managed
by the life 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 are TRUE?

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 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
time of 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 policyholders 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 determined 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 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?

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 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 not more than fixed rates

II. Investors are exposed to market and specific risks
III. Shares can become worthless if company become 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 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 are
flexible as they are account driven
III. The benefits and risks of variable life 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

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11. Mr. Juan dela Cruz is currently earning Php.30,000.00 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?

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 policyholders an access to a pooled

or diversified portfolios
II. The variable life policyholder 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 policyholder can have access to a pool of
qualified and trained professional fund managers

a. I & II
b. I & III
c. I, II & III
d. II & III

13. 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

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

14. 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

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 b. A close – end fund and does not have to dispose off if large
number 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 EXCHANGE
COMMISSION (SEC) which usually invests in a wide range of
equities and other investment

15. 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 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 the investment
monies to the value of the fund

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

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 c. I,II &III
d. II, III &IV

17. Which of the following BEST describes the policy benefits 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

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 policy borne solely by the customer
c. Because the agent may give the wrong recommendations
d. Because the policyholder expects higher returns

19. 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

a. I & II
b. I & III
c. II & III

20. Which one of the following statements is FALSE?

a. Variable life insurance policies offer investors policies with values

and indirectly linked to the investment performance of the life
company
b. Life company will carry out a valuation of its funds yearly and any
surplus may be allocated to participating policyholder as cash
dividends

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 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 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 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
c. To top – up 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 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

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

23. 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, they are technically whole life insurance

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 II. Top – ups or single premium injections are allowed in these
plans
III. Policyholders have the flexibility of varying the level cover

a. I, II & III
b. II & III
c. I & II
d. I & III

24. Investing in bonds offer the following advantages EXCEPT

a. It offers protection to the principal and guaranteed steady 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 investor a chance for capital preservation
d. It enables the investor an 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 policyholder has direct control over the
investment decisions of the variable life fund

a. I, II & III
b. I & II
c. I & III
d. II & III

26. Single premium variable life insurance policy:

a. Must be issue with a minimum 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 characteristics of variable life

policies are TRUE?

I. Variable life policies generally have a larger exposure to equity

investment than with participating and other traditional policies

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 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 & III
b. I & II
c. II & III
d. I & III

28. Which of the following statements about benefits in 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 an 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 enables small investor to participates in a pool of
diversified portfolio in 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 their investment between funds
II. Policy owners can easily take premium holidays and add 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

a. All of the above

b. I, II & III
c. I, II & IV
d. I, III & IV

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30. 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 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 & IV
b. II, III & IV
c. I, II & III
d. I, II & IV

31. The switching facility 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 about surrender value under traditional

participating life insurance products are TRUE?

a. Cash value is paid when 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
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 addition up to the date
of surrender

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 33. 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 finds 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
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 owners who are risks averse should not purchase life
insurance policies with high protection and guaranteed cash and
maturity values

34. What would be the withdrawal values after a year?

Offer Price = Php. 16.00

Bid – Offer spread = 4..5%
Number of units bought = 25,000
Policy Fee = 1,800
Admin and Mortality charge = 8,750
Top – up Fee = 700
Admin for Top – up = 2,000
Sum assured is 190% of single premium or the value of the units,
whichever is higher.

ASSUMPTIONS:

1. Charges and fee are deducted after the single premium has
been invested into the account
2. The growth rate of the unit price and bid – offer spread is
maintained at 8% and 4.5% respectively

a. Php. 432,000.00
b. Php. 420,069.02
c. Php. 401,107.58
d. Php. 412,500.00

35. the protection cost under a variable life insurance policy

_______________:

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 I. Are met by a flat initial charges for regular premiums 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

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

36. Which one of the following statements about diversification in portfolio

management is FALSE?

a. A diversified portfolio provides greater security to an investor

having to sacrifice the return for the portfolio
b. Diversification can completely eliminate the risk or investing in
stocks in a portfolio
c. Diversification can involve purchasing different types of stocks
and investing in stocks of different countries
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 a fixed dividend

II. Has the priority over the company assets during dissolution
III. They enjoy benefit of capital appreciation

a. I, II & III
b. I & II
c. I & III
d. II & III

38. With traditional participating 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

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 II. Have already been smoothened 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 life company

a. I, II & III
b. I, II & IV
c. I, III & IV
d. II, III & 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, strategies and
objectives are coordinated with the market analysis,
segmentation and targeting
IV. The giving of monetary assistance and discount to the
customers

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

40. Which one 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 increase when there is a bull run in the stock
market
d. Investment in cash decrease 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

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 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 variable life fund and to
provide certain level of life cover

a. II, III & IV

b. I, III & IV
c. I, II & IV
d. I, II & 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 has 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
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 & III
d. I & 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

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 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’s expectation
IV. The risk of losing some or all of a person’s initial investment

a. I & III
b. I & II
c. III & IV
d. II & IV

45. The duties of the 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 that the fund manager adhere to the provision of the
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

46. Policy fee payable by variable life insurance policy owner is to cover
_______________:

a. The handling charges by professional investment managers

b. The price of 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

47. The selling price under a variable life insurance policy is:

a. The price at which units under the policy are bought back by the
life company
b. The price at which units under the policy are offered for sale by the
life company
c. Also known as the bid price
d. A fixed amount throughout the life of the policy

48. In risk – return profile of cash funds, bond funds, balanced funds,
managed funds and equity
Funds, a risk – return graph will show that __________________

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

49. Diversification in investment involves ________________________

a. Putting all the funds under management into one category of

investment
b. Spreading the risk 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 by putting all one’s eggs in one
basket

50. Variable life funds can be invested in any financial instruments including
cash funds, bonds 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 as
assets are usually the last to 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 share of stocks and investor who buy such assets usually
aims for capital appreciation

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ANSWER KEY:

1. D 26. A
2. B 27. D
3. C 28. B
4. D 29. D
5. C 30. D
6. D 31. D
7. D 32. C
8. C 33. C
9. A 34. D
10. D 35. B
11. C 36. B
12. A 37. A
13. C 38. A
14. A 39. B
15. C 40. B
16. C 41.
17. C 42. A
18. B 43. D
19. A 44. D
20. A 45. A
21. B 46. D
22. C 47. B
23. C 48. B
24. D 49. C
25. A 50. D

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