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PRULIFE UK_IC EXAM ( PART 2, 31-60 VARIABLE )

A vibrant illustration of a finance professional reviewing variable life insurance policies, surrounded by charts and graphs representing investment strategies

PRULIFE UK_IC Exam (Part 2)

Test your knowledge of variable life insurance concepts with our engaging quiz designed for aspiring professionals in the finance and insurance industries. This quiz covers a range of topics, ensuring a comprehensive understanding of variable life policies and investment risks.

Multiple choice format for easy answering
Covers key concepts in insurance and investment
Ideal for certification preparation

30 Questions8 MinutesCreated by LearningGuide275

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 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 addition up to the date of surrender

33. Which one of the following statements about risks of investing in variable life funds is TRUE?

A. Policy owners who are risk averse should buy 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 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 higher risk but can expect to achieve higher return than the traditional life insurance 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 should 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 = 2000 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 rate of the unit price and bid-offer spread is maintained at 8% and 4.5% respectively.

A. Php. 432,000.00

B. Php. 420,069.20

C. Php. 401,107.58

D. Php. 412,500.00

35. 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

A. I, II, & III

B. I, II, & IV

C. I, III & IV

D. II, III, & IV

36. Which of the following statements about diversification in portfolio management is FALSE?

A. A diversified portfolio provides greater security to an investor having to sacrifice return for the portfolio.

B. Diversification can completely eliminate the risk of investing in stocks in a portfolio.

C. Diversification can involve purchasing different types of stocks and investing stocks in 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 company assets during a 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 company’s investment performance II. Have already been smoothened by the life company III. Do not have the highs and lows of investment return as in good investments 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

A. I, II, & II

B. I, II & IV

C. I, III, & IV

D. II, III, & IV

39. 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

A. I, & III

B. II, & III

C. II, & IV

D. II, III, & IV

40. Which of the statements is true about CASH?

A. It has a high yield potential

B. Amount invested in cash depends on 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 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

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 and 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 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’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 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 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 insurance 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. 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 of 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

49. 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 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 shares of stocks and investors who buy such assets usually aim for capital appreciation

50. Which of the following statements describe the differences between variable life products and participating products? I. Variable life products allow policyholders to vary the premium payments 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 premiums from time to time to add more units to his account unlike participating products.

A. I, II, and III

B. I

C. I and III

D. II and III

51. 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. 1,800 Admin and Mortality charge = 3% Sum assured is 200% of single premium or the value of the units, whichever is higher

A. Ps. 43,400.90

B. Ps. 33,246.78

C. Ps. 22,500.00

D. Ps. 15,299.96

52. Which of the following statements BEST describes “variable life” policies?

A. It is a fixed premium policy with returns that will not vary with the underlying value of investments.

B. It is a fixed premium policy with returns that will vary with the underlying value of investments.

C. It is a flexible premium policy with returns that will not vary with the underlying value of investments.

D. It is a flexible premium policy with returns that will vary with the underlying value of investments.

53. Which of the following factors contribute to the specific risk of an investment: I. Rate of corporate taxes II. Fraud by senior management III. Financial leverage of the company

A. I and II

B. II and III

C. I and III

D. I, II and III

54. Investing in bonds offers 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

55. 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

A. I, IV, III & II

B. I, III, IV & II

C. I, IV, II, & III

D. I, II, III & IV

56. 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

A. I, II, & III

B. II, III, & IV

C. I, II & IV

D. I, III, & IV

57. 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 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 & I

B. I, II, & III

C. I & III

D. II & III

58. Which of the following information is NOT required to be disclosed to policyholders of variable life policies?

A. The net withdrawal value as of the statement date.

B. The premiums received and charges levied during the period

C. The basis and frequency for valuing the assets.

D. 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.

59. Which of the following statements BEST describes “variable life” policies?

A. It is a fixed premium policy with returns that will not vary with the underlying value of investments.

B. It is a fixed premium policy with returns that will vary with the underlying value of investments.

C. It is a flexible premium policy with returns that will not vary with the underlying value of investments.

D. It is a flexible premium policy with returns that will vary with the underlying value of investments.

60. 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 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 addition up to the date of surrender

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