VUL/ULP MOCK EXAMS

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1. All of these are mandatory provisions in a Variable Life D 4. The benefits of investing in Variable Life funds include C
policy contract EXCEPT: _____________________.

A. Incontestability Provision I. Policyowners have access to pooled or diversified

B. The Entire Insurance Contract Provision portfolios of the investment.
C. Misstatement of Age or Sex Provision II. Policyowners can easily change the level of the
D. None of the above premium payments as the product design of Variable
Life insurance policies have clear structures which cater
2. The amount of risk a person can take depends on: D
separately for investment and insurance protection.
III. Policyowners can gain access to Variable Life funds
I. Age
managed by professional investment managers with
II. Investment objective
proven track records.
III. Financial conditions
IV. Policyowners can buy a Variable Life insurance
IV. Personality
policy only with a high initial investment.
A. I and II only
A. I, II and IV
B. II, III and IV only
B. I, III and IV
C. I, II and III only
C. I, II and III
D. All of the above
D. II, III and IV
3. The benefits of investing in Variable Life fund include: D
5. The characteristics of a Variable Life insurance policy C
include _____________________.
I. Policyowners have access to a pooled and diversified
portfolio of investment.
I. Its withdrawal value and protection benefits are
II. The policyowner can easily change the level of
determined by the investment performance of the
premium payments as the product design of Variable
underlying assets.
Life insurance policies have clear structures which cater
II. Its protection costs are generally met by implicit
separately for investment and insurance protection.
charges.
III. Policyowners can gain access to Variable Life funds
III. Its commission and company expenses are met by a
managed by professional investment managers.
variety of implicit charges with normally 6 months'
IV. The policyowner is relieved of the day to day
notice given by the life companies prior to any change.
administration of his investment.
IV. Its withdrawal value is normally the value of units
allocated to the policyowner calculated at the bid
A. I, II, and III
price.
B. I, II, and IV
C. I, III, and IV
A. I, II and III
D. All of the above
B. II, III and IV
C. I, II and IV
D. I, III and IV
6. The difference between the offer price and the bid C
price is?

A. Bid price spread

B. Offer price spread
C. Bid-offer spread
D. None of the above
7. The disadvantage of fixed income securities include... B 11. The flexibility benefits of investing in Variable Life B
funds include:
I. The coupon rate is fixed and cannot respond to
inflation. I. Policyowners can easily change the level of sum
II. The investors are exposed to market specific risks. insured and switch their investments between funds.
III. Fluctuations in bond prices may lead to capital II. Policyowners can easily take premium holidays and
losses. add single premium top-ups.
III. Variable Life insurance products have simple
A. II and III only product design with a clear structure which caters
B. I and II only separately for investment and insurance protection.
C. I, II and III IV. Policyowners can easily change the level of their
D. I and III only premium payment.
8. Diversification in investment involves C
A. I, II, and III
______________________.
B. I, II, and IV
C. I, III, and IV
A. Putting all the funds under management into one
D. I, II, III, and IV
category of investment.
B. Spreading the risks of investment by not putting the 12. The flexibility benefits of investing in Variable Life C
fund into several categories of investment. funds include ________________:
C. Reducing the risks of investment by putting one
fund under management into several categories of I. The policyowner can easily change the level of sum
investment. assured and switch their investment between funds.
D. Reducing the risks of investment by putting all one's II. Policyowners can easily take premium holidays and
eggs in one basket. add single premium to topups.
III. Variable Life insurance products have a simple
9. The duties of the trustees of a unit trust do not include: A
product design with a clear structure, which cater
separately for investment and insurance protection.
A. Managing the portfolio of investment and
IV. Policyowners can easily change the level of their
administering the buying and selling of shares in the
premium payment.
unit trust itself
B. Ensuring that the fund manager adhere to the
A. All of the above
provision of the trusts deeds
B. I, II and III
C. Acting generally to protect the unit-holders
C. I, II and IV
D. Holding the pool of money and assets in trust in
D. I, III and IV
behalf of the investors
13. For Variable Life policies, the definition of selling price A
10. Factors to consider in buying Properties: A
is:
I. Quality of land
A. The price at which units under the policy is offered
II. The location of land
for sale by the life company.
III. The value of building on land
B. It is also known as the bid price.
IV. The investment
C. The price at which units under the policy are bought
V. Place of work
back by the life company.
D. It is a fixed amount throughout the life of the policy.
A. I, II and III only
B. II, III and IV only
C. I, III and V only
D. All of the above
14. The fundamental differences between traditional B 19. In the risk-return profile of cash funds, bond funds, B
participating life insurance policies and Variable Life balanced funds, managed funds and equity funds, a
insurance policies include __________________. risk-return graph will show that _____________________.

I. Variable Life insurance policies are less likely to offer I. Higher return normally comes with lower risk.
more choices in terms of the type of investment funds. II. Higher return normally comes with higher risk.
II. The investment elements of Variable Life insurance III. At the top end of the graph are equity funds.
policies are made known to the policyowner at the IV. The relatively risk-less cash funds sit at the bottom
outset and are invested in a separately identifiable end of the graph.
fund which is made up of units of investment.
III. Variable Life insurance policies offer the potential A. I, II and III
for higher returns. B. II, III and IV
IV. Traditional participating policies aim to produce a C. I, II and IV
steady return by smoothing out market fluctuation. D. I, III and IV
20. Investing in bonds offer the following advantages D
A. I, III and IV
EXCEPT:
B. II, III and IV
C. I, II and III
A. It offers protection to the principal and guarantees
D. I, II and IV
a steady stream of income.
15. If a policyowner fails to pay premium on time and there B B. It is a place of temporary refuge when the investor
are no withdrawal values in the account, the policy will: foresees that the market outlook is uncertain.
C. It allows the investor a chance for capital
A. Continue in full force for a period of grace. preservations.
B. Terminate immediately on the day premium is due. D. It enables the investors an opportunity for capital
C. Continue at a reduced sum assured. appreciation
D. Continue at the same sum assured for the same basic
21. The investment returns under a Variable Life insurance C
benefits.
policy __________________.
16. If a policyowner returns the Variable Life insurance A
contract within the cooling-off period, he will receive: I. Are not guaranteed.
II. Are assured.
A. A refund equal to the market value of the units plus III. Are linked to the performance of the investment
initial charges. fund management by the life company.
B. All premiums paid. IV. Fluctuate according to the rise and fall of the
C. A refund equal to the market value of the units only. market prices.
D. Nothing.
A. I, II and III
17. If the current offer price = P2.50 and the bid-offer A
B. I, II and IV
spread = 4%, what is the bid price?
C. I, III and IV
D. II, III and IV
A. P2.40
B. P2.50 22. The investment returns under Variable Life insurance C
C. P2.60 policy
D. P2.70
I. Are not guaranteed
18. In a Unit Trust Investment, the duties of a Trustee A
II. Are insured
include all of these EXCEPT:
III. Are linked to the performance of the investment
fund managed by the life office
A. Selects and manages the investments of the Trust.
IV. Fluctuate according to the rise and fall of market
B. Holds the pool of money and assets in trust on
prices
behalf of the investors.
C. Ensures that the fund managers adhere to the
A. I, II and III
provisions of the trust deed.
B. I, II and IV
D. Protects the interests of unit holders.
C. I, III and IV
D. II, III and IV
23. Mr. Juan dela Cruz is currently earning P30,000/month. B 26. People generally invest their money to provide: B
He is 35 years old and has a reasonable amount of
savings. He has a moderate level of risk tolerance. I. An improvement in their financial position
What kind of policy would you recommend for him to II. A less comfortable standard of living
buy? III. Retirement income
IV. Funds for paying necessary expenses and taxes
A. Participating Endowment when the person dies
B. Variable Life policies
C. Participating Whole Life A. I,II and III
D. Annuities B. I, III and IV
C. I, II, and IV
24. The objective of satisfying customers' need of B
D. II, III and IV
profitably can be achieved by an advisor through:
27. The policy fee payable by a Variable Life insurance D
I. The giving of freebies to the customers policyowner is to cover _______________:
II. Extensive investment training by the company
III. The use of sales plan, where sales goals, strategies A. The handling charges by professional investment
and objectives are coordinated with market analysis, managers.
segmentation and targeting B. The price for each unit bought under the Variable
IV. The giving of monetary assistance and discount to Life insurance policy.
customers C. The mortality costs of the Variable Life insurance
policy.
A. I and III D. The administrative expenses of setting up the
B. II and III Variable Life insurance policy.
C. I, II and IV
28. The protection costs under a Variable Life insurance B
D. II, III and IV
policy
25. Offer Price = P16 C ______________________:
Bid-Offer Spread = 4.5%
Units = 25,000 I. Are met by flat initial charges for regular premium
Policy fee = P1,800 plans.
II. Are generally covered by the cancellation of units
Administrative and Mortality Charges = P8,750 in the fund.
Top-up Fee = P700 III. Are generally met by explicit charges stipulated
Administrative Top-up Fee = P2,000 openly in the policy terms.
IV. Vary with age of policyowner and level of cover.
Presuming all charges are deducted by canceling units
and that the bid price increases by 8%, what is the A. I, II and III
withdrawal value after a year? B. I, II and IV
C. I, III and IV
A. 432,000 D. II, III and IV
B. 420,069.02
29. Rank the following in terms of their liquidity, from the C
C. 401,107.58
least liquid to the most liquid:
D. 412,500
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
30. Risk can be classified into two particular categories in D 34. The statements below are true about the top-up option C
relation to investment. They include __________________: of a Variable Life insurance product EXCEPT:

I. The risk of not losing some or all of a person's initial A. The policyowner pays further single premium to
investment. make a top-up.
II. The risk of rate of return on the investment not B. Normally, policyowners are allowed to make a top-
matching up to the individual's expectation. up on their policies at any time subject to a minimum
III. The risk of rate of return on the investment amount.
matching up to the individual's expectation. C. Policyowners may buy additional units of Variable
IV. The risk of losing some or all of a person's initial Life fund and these units will be allocated to new
investment. Variable Life insurance policies.
D. Further premiums at the time of top-up will be used
A. I and III in full after deducting charges to purchase additional
B. I and II units of the Variable Life funds.
C. III and IV
35. The switching facility under Variable Life insurance D
D. II and IV
policies is very useful _________________.
31. The selling price under a Variable Life insurance policy B
is: A. For the purpose of profit planning by the life
policies.
A. The price at which units the policy is bought back by B. For the purpose of assets planning by the trustee.
the life company. C. For the purpose of sales planning by the fund
B. The price at which units under the policy are offered managers.
for the sale by the life company. D. For the purpose of financial planning by the
C. Also known as the bid price. policyowners.
D. A fixed amount throughout.
36. Term insurance _______________. B
32. A Single Premium Variable Life insurance policy: A
A. Provides for payment of the sum insured when the
A. Must be issued with a minimum death benefit life insured survives a specific period.
B. Must be issued with a maximum withdrawal value B. Provides protection for a specific period and has no
C. Has no death benefit savings element.
D. Has no withdrawal value C. Is the most complex and expensive of all life
insurance products.
33. These statements are true EXCEPT B
D. Provides for surrender of cash values on early
termination of the insurance.
A. No regular income may be gained from investing in
commodities. 37. To the policyowners, administration benefits under C
B. Investing in fixed deposits gives high guaranteed Variable Life include:
returns.
C. People invest money to enhance a comfortable A. Engaging independent professional fund managers
standard of living. personally to manage the complicated transaction.
D. People invest money to provide funds for the higher B. Constructing their own diversified portfolio.
education of their children. C. Keeping track of their investment through the
statements provided regularly by the insurance
company.
D. Exercising investment expertise by selecting funds
that will give higher returns.
38. Under a Regular Premium Variable Whole Life D 41. Variable Life funds can be invested in any financial D
insurance plan _________________. instruments including cash funds, bond funds, equity
funds, property funds, specialized funds and diversified
I. Premium top-ups and holidays, subject to the life funds.
company's administrative rules are usually allowed. Equity funds ______________:
II. Life protection is the main objective of the plan with
investment as a nominal purpose. A. Invest in shares of stocks and the magnitude of the
III. Withdrawals after the payment of a few years' change in unit prices will only depend on the quantity
premium are usually allowed. of the equities held.
IV. A single premium contribution is made to the policy B. Invest in shares of stocks and during market
which uses the premium to purchase units in a Variable recession, such assets are usually the last to
Life fund and to provide a certain level of life cover. depreciate.
C. Invest in share of stocks which are inherently of
A. II, III and IV lower risk in nature and the prices of stocks are stable.
B. I, III and IV D. Invest in shares of stocks and an investor who buys
C. I, II and IV such assets usually aims for capital appreciation.
D. I, II and III
42. Variable Life insurance policyowners may make A
39. Under Variable Life insurance policies ____________________. C withdrawals in terms of ________________.

I. There is no guaranteed minimum sum assured for the A. The number of units or fixed monetary amount
purpose of declaring dividends. through the cancellation of units.
II. There is no guaranteed minimum sum assured as a B. The number of units or fixed monetary amount
level of life insurance protection. through reduction of the life cover sum assured.
III. Each of the policyowner's premiums will be used to C. The fixed monetary amount only through reduction
purchase units, the number of which is dependent on of the life cover sum assured.
the selling price of each unit. D. The number of units through the cancellation of
IV. Purchase of units can only be made from the units.
Variable Life fund itself, which will then create new
43. What are the advantages of investing in preferred A
units and add the investment monies to the value of
shares?
the fund.
I. It gives shareholders the right to a fixed dividend.
A. I and IV
II. Has the priority over company assets during
B. II and IV
dissolution.
C. III and IV
III. They enjoy the benefits of capital appreciation.
D. II and III
40. A UNIT TRUST is __________________________: A A. I, II and III
B. I and II
A. Established by a trust deed which enables a trustee C. I and III
to hold the pool of money and assets in trust on behalf D. II and III
of the investor.
44. What are the ADVANTAGES of investing in preferred D
B. A closed-end fund and does not have to dispose of
shares?
its assets if a large number of investors sell their
shares.
I. It has priority on company assets during dissolution.
C. One whereby an investor buys units in the trust
II. It has a benefit of capital appreciation.
itself and not from the shares of the company.
III. The shareholder has the right to a fixed dividend.
D. An organization registered under the Security and
Exchange Commission (SEC) which usually invests in a
A. I and II
wide range of equities and other investments.
B. I and III
C. II and III
D. I, II and III
45. What are the basic types of real estate investment? B 49. What is the most suitable investment instrument for an D
investor who is interested in protecting his principal
I. Rural Property and receiving a steady stream of income?
II. Domestic Property
III. Agricultural Property A. Equities
IV. Commercial/Industrial Property B. Warrants
V. Foreign Property C. Variable Life policies
D. Fixed income securities
A. I, II and III only
50. What is the "Net Amount at Risk?" B
B. II, III and IV only
C. I, III and V only
A. The minimum death benefit
D. All of the above
B. The excess between the minimum death benefit and
46. What are the benefits available when investing in C the value of the policyowner's separate variable
Variable Life funds? account
C. The sum insured
I. The Variable Life funds offer policyowners an access D. The difference between the minimum death benefit
to a pooled of diversified portfolios. and the sum assured
II. The Variable Life policyowner can vary his premium
51. What would be the withdrawal value after a year? C
payments, take premium holidays, add single premium
Offer Price = P16.00
top-ups and change the level of sum assured easily.
Bid-offer spread = 4.5%
III. The Variable Life policyowner can have access to a
Number of Units bought = 25,000
pool of qualified and trained professional fund
Policy Fee = P1,800
managers.
Admin and Mortality charge = P8,750
Top-up Fee = P700
A. I and II
Admin for Top-up = P2,000
B. I and III
C. I, II and III
Sum assured is 190% of single premium or the value of
D. II and III
the units, whichever is higher.
47. What are the disadvantages of investing in cash and C Assumptions:
deposits? 1. Charges and fees are deducted after the single
premium has been invested into the account.
I. It is the safest type of investment. 2. The growth rate of the unit price and the bid-offer
II. They provide the lowest return. spread is maintained at 8% and 4.5% respectively.
III. There is reinvestment risk.
A. Ps. 432,000.00
A. I only B. Ps. 420,069.02
B. II only C. Ps. 401,107.58
C. II and III only D. Ps. 412,500.00
D. I, II and III
52. Which is NOT a characteristic of a Variable Life policy? D
48. What are the disadvantages of investing in common C
shares? A. It is used solely for investment purposes.
B. The commission and office expenses are met by
I. Dividends are paid not more than fixed rates. explicit charges.
II. Investors are exposed to market and specific risks. C. It has generally, though not necessarily, more
III. Shares can become worthless if company becomes exposure to equity investments.
insolvent. D. Its cash value is usually the value of units allocated
to the policy calculated at the prevailing bid price.
A. I, II
B. I, III
C. II, III
D. I, II and III
53. Which of the following are fixed income securities? A 57. Which of the following BEST describes the policy C
benefits of Variable Life policies?
I. Corporate Stocks
II. Government Bonds A. The policy benefits are payable only for death or
III. Preferred Shares disability.
IV. Money Market Instruments B. The policy benefits will depend on the long-term
V. Properties performance of the life company.
C. The policy benefits are directly linked to the
A. I, II, III and IV only investment performance of the underlying assets.
B. I and III only D. The policy benefits are guaranteed.
C. I, III and V only
58. Which of the following funds is comprised of a higher C
D. All of the above
proportion of equity and a lower proportion of fixed-
54. Which of the following are some of the flexibility C income instruments?
features of Variable Life insurance policies?
A. Bond Funds
I. Partial Withdrawal B. Cash Funds
II. Variation in sum assured C. Managed Funds
III. Guaranteed withdrawal values D. Mixed Funds
59. Which of the following information is NOT required to A
A. II only
be disclosed to policyowners of Variable Life policies?
B. III only
C. I and II only
A. The basis and frequency for valuing the assets
D. I, II and III
B. The number and value of units held at the beginning
55. Which of the following are the main characteristics of C of the period, bought and sold during the period, and
Variable Life insurance policies? held at the end of the period
C. The net withdrawal as of the statement date
I. The policies can be used for investments, as a source D. The premiums received and charges levied during
of regular savings and protection. the period
II. The withdrawal and protection benefit are
60. Which of the following information must NOT be A
determined by the investment performance of the
conveyed to the client in the sale of Variable Life
underlying assets.
insurance policies?
III. The net withdrawal values of the policies are the
gross withdrawal values shown in the policy which
A. Guaranteed interest rate
includes cash dividends up to the date of surrender,
B. Time horizon of the product
less all indebtedness and includes interests.
C. Benefits illustrations using 10% as the gross
D. Rate of return
A. I only
B. II only 61. Which of the following investment options entitles the D
C. I and II only holder ownership and share of profits in the form of
D. I, II and III dividends appreciation?

56. Which of the following are types of corporate stocks? C

A. Cash
B. Bonds
I. Debenture Stocks
C. Futures
II. Government Stocks
D. Ordinary Shares
III. Loan Stocks
IV. Money Market Instruments
V. Convertible Stocks

A. I, II, and III only

B. I, II, III and IV only
C. I, III and V only
D. All of the above
62. Which of the following is/are the main characteristic/s D 66. Which of the following statements about investment A
of Variable Life policies? returns under a Variable Life insurance policy is NOT
TRUE?
I. The policies can be used for investment, as a source
of regular savings and protection. A. It is assured.
II. The withdrawal values and protection benefits are B. It is not guaranteed.
determined by the investment performance of the C. It fluctuates based on the rise and fall of market
underlying assets. prices.
III. The net cash values of the policies are the gross D. It is linked to the performance of the investment
cash values shown in the policy that includes dividends fund managed by the life company.
up to the date of surrender, less any indebtedness
67. Which of the following statements about rebating are A
including interest.
TRUE?

A. II
I. Rebating is prohibited under the Insurance Code.
B. I
II. Rebating deals with offering the prospect a special
C. I, II and III
inducement to purchase a policy.
D. I and II
III. Rebating will enhance the sales performance and
63. Which of the following statements about benefits in B uphold the prestige of an advisor.
Variable Life fund is FALSE?
A. I and II
A. The fund provides a highly diversified portfolio, thus, B. I and III
lowering the risk of investment. C. II and III
B. The fund ensures definite high yield for an investor
68. Which of the following statements about rebating are A
since it is managed by professionals who are well-
TRUE?
versed in the management of risks of investment
portfolios.
I. Rebating is prohibited under the Insurance Code.
C. The fund relieves the investor from the hassles of
II. Rebating deals with offering the prospect a special
administering his/her investment.
inducement to purchase a policy.
D. The fund enables small investors to participate in a
III. Rebating will enhance the sales performance and
pool of diversified portfolios in which he/she with low
uphold the prestige of an advisor.
investment capital is likely to have acceded to.
64. Which of the following statements about investment A A. I and II
objective is FALSE? B. I and III
C. II and III
A. People invest money in fixed deposits to produce
69. Which of the following statements about Single C
high and guaranteed returns.
Premium Variable Life policies are TRUE?
B. People invest money to enhance a comfortable
standard living.
I. There is no fixed term in a Single Premium Variable
C. People invest money to provide funds for the higher
Life policy and therefore, it is technically Whole Life
education of their children.
insurance.
D. Investment in commodities has no regular income.
II. Top-ups or single premium injections are allowed.
65. Which of the following statements about investment D III. Policyowners have the flexibility of varying the life
objectives is FALSE? coverage.

A. People invest money to enhance a comfortable A. I and II

standard of living. B. I and III
B. People invest money to provide funds for the higher C. II and III
education of their children. D. I, II, and III
C. Investments in commodities produce no regular
income.
D. People invest money in equities to produce high and
guaranteed income.
70. Which of the following statements about Single B 73. Which of the following statements about the C
Premium Variable Life policies are TRUE? differences between Variable Life policies and
Endowment policies are FALSE?
I. There is no fixed term in a Single Premium Variable
Life policy and therefore, they are technically Whole I. The policy values of Variable Life and Endowment
Life insurance. policies directly reflect the performance of the fund of
II. Top-ups single premium injections are allowed in the life company.
these plans. II. The premiums and benefits of the Endowment
III. Policyowners have the flexibility of varying the policies are described at inception of the policy
level cover. whereas Variable Life policies are flexible as they are
account driven.
A. I, II and III III. The benefits and risks Variable Life and Endowment
B. II and III policies directly accrue to the policyowners.
C. I and II
D. I and III A. I and II
B. I, II and III
71. Which of the following statements about surrender C
C. I and III
value under traditional participating life insurance
D. II and III
products is TRUE?
74. Which of the following statements about the feature of D
A. Cash value is paid when a yearly renewable term Regular Premium Variable Life Policy are TRUE?
insurance policy is surrendered.
B. When a participating insurance policy is I. Top-ups are usually allowed.
surrendered, the surrender value is calculated by II. The level of cover can be varied.
multiplying the bid price with the number of units. III. Premium holidays are usually allowed.
C. The amount of surrender value is usually higher than
the amount under nonparticipating policies and it A. I and II only
varies with the age of the assured, being lower at older B. I and III only
ages. C. II and III only
D. In the case of participating policies, the net cash D. I, II and III
surrender value includes the surrender value of the
75. Which of the following statements about the option to A
paid-up addition up to the date of surrender.
top-up under Variable Life insurance products is
72. Which of the following statements about the B FALSE?
characteristics of Variable Life policies are TRUE?
A. Policyowners may buy additional units of the
I. Variable Life policies generally have larger exposure Variable Life fund and these units will be allocated to
to equity investments than with participating and other new Variable Life insurance policies.
traditional policies. B. Further premiums at the time of top-ups will be used
II. The protection costs are generally met by implicit in full, after deducting charges for top-ups, to purchase
charges, which vary with age and level of cover. additional units of the Variable Life funds.
III. Commissions and company expenses are met by a C. To top-up a policy, the policyowner pays further
variety of explicit charges, some of which are variable. single premium at the time of top-up.
D. Policyowners are normally allowed to top-up their
A. I, II and III policies at any time, subject to a minimum amount.
B. I and II
C. II and III
D. I and III
76. Which of the following statements about the risk of C 79. Which of the following statements about Variable Life B
investing in Variable Life funds is TRUE? policies are TRUE?

A. Policyowners who are risk averse should buy I. The withdrawal value is not guaranteed.
Variable Life insurance policies with high equity II. The volatility of the returns depends on the
investment. investment strategy of the fund.
B. Investments in Variable Life funds which are fully III. The Variable Life policyowner has direct control
invested in units of equity bonds are not suitable for over the investment decisions of the Variable Life
policyowners who can tolerate the risks of short term fund.
fluctuation in their cash value.
C. Policyowners who invest in Variable Life funds with A. I, II and III
high equity investment face greater risk but can expect B. I and II
to achieve higher return than the Traditional Life C. I and III
insurance product over the long term. D. II and III
D. Policyowners who are risk averse should not
80. Which of the following statements are FALSE? C
purchase life insurance policies with high protection
and guaranteed cash and maturity values.
I. Higher capital gain is normally associated with lower
77. Which of the following statements about twisting is D risk
FALSE? II. One way to lower risk in investment is to diversify
III. One method of measuring risk is to determine the
A. Twisting is a special form of misrepresentation. average return and its standard deviation from future
B. It refers to an advisor inducing a policyowner to data
discontinue a policy with another company without IV. Diversification can be achieved by investing in
disclosing the disadvantage of doing so. different countries and/or types of assets
C. It includes misleading or the incomplete comparison V. An investor can always choose an investment that is
of policies. risk free
D. It refers to an advisor offering a prospect a special
inducement to purchase a policy. A. I, II and III only
B. II, III and IV only
78. Which of the following statements about Variable Life D
C. I, III and V only
policies are TRUE?
D. All of the above
I. Offer price is used to determine the numbers of units 81. Which of the following statements are FALSE? A
to be cancelled from the account.
II. The margin between the bid and offer price is used I. The bid-offer spread is used to provide a death
to cover the management cost of the policy. benefit for the Variable Life insurance policy.
III. The policy value is calculated based on the bid II. The bid price is always higher than the offer price.
price of units allocated into the policy. III. The bid-offer spread is usually about 5%.
IV. There are two types of death benefits under the
A. I, II and III Variable Life insurance product. They may offer
B. I and II either/or both types depending on its product design
C. I and III and on the discretion of the policyowner.
D. II and III
A. I and II
B. II and III
C. II and IV
D. None of the above
82. Which of the following statements are FALSE? B 85. Which of the following statements describes the B
difference between Variable Life products and
I. The policyowners may request a partial withdrawal of traditional participating life products?
the policy and the amount will be met by cashing the
units at the offer price. I. Variable Life products allow policyowners to pay
II. The structure of charges and the investment content top-up premiums from time to time to buy more units
of a Variable Life policy are specified in the policy for his account unlike traditional participating life
document and the policy statement. policies.
III. Some Variable Life policies grant loans to II. Variable Life products allow policyowners to take
policyowners which is limited to a percentage of the premium holiday unlike traditional participating life
cash value. products.
IV. Commissions and office expenses are met by a III. Variable Life products can take the form of Whole
variety of implicit charges, some of which are variable. Life or Endowment policies unlike traditional
participating life products.
A. I and II only
B. I and III only A. I
C. II and III only B. I and II
D. All of the above C. I and III
D. I, II, and III
83. Which of the following statements are TRUE? D
86. Which of the following statements is FALSE? C
I. The policy value of Variable Life policies is
determined by the offer price at the time of valuation. A. Rebating is to offer a prospect a special inducement
II. The policy value of Endowment policies is the cash to purchase a policy.
value plus any accumulated dividends less any B. Twisting is a specific form of misrepresentation.
outstanding loans due at the time of surrender. C. Misrepresentation is a specific form of twisting.
III. The life company needs to maintain a separate D. Switching is a facility allowing policyowners to
account for Variable Life policies distinct from the switch to another Variable Life fund offered by the
general account. company.
87. Which of the following statements is true about CASH? B
A. I, and II
B. I, II and III
A. It has high yield potential.
C. I and III
B. The amount invested in cash depends on the size of
D. II and III
the cash flow requirement.
84. Which of the following statements describes the B C. Investment in cash increases when there is a bull run
difference between Variable Life insurance products in the stock market.
and traditional participating products? D. Investment in cash decreases when interest rates
rise.
I. Variable Life insurance products allow policyowners
88. Which one of the following statements about B
to change the premium payments but traditional
diversification in portfolio management is FALSE?
participating life products do not.
II. Variable Life insurance products can take the form
A. A diversified portfolio provides greater security to
of Whole Life or Endowment policies but Traditional
an investor having to sacrifice the return for the
Life policies cannot.
portfolio.
III. Variable Life insurance products allow the
B. Diversification can completely eliminate the risk of
policyowners to pay future single premiums from time
investing in stocks in a portfolio.
to time to add more units to his account but Traditional
C. Diversification can involve purchasing different
Life participating products do not.
types of stocks and investing in stocks of different
countries.
A. I only
D. Diversification helps to spread the portfolio risk by
B. I and III only
investing in different categories of investment in a
C. II and III only
portfolio.
D. I, II and III
89. Which one of the following statements about the B 93. Which statement best describes Variable Life? D
flexibility features of Variable Life policies is FALSE?
A. Fixed premium with returns that will not vary.
A. Policyowners may request for a partial withdrawal B. Fixed premium with returns that will vary.
of the policy, and the withdrawal amount will be met C. Flexible premium with returns that will not vary.
by cashing the units at bid price. D. Flexible premium with returns that will vary.
B. Policyowners can take loans against their Variable
94. Which statement regarding the risk of investment in C
Life policies up to the entire withdrawal value of their
Variable Life is TRUE?
policies.
C. Policyowners have the flexibility of switching from
A. Policyowners who are risk averse should not
one fund to another provided it satisfies the company's
purchase a life insurance policy with high protection
switching criteria.
and guaranteed cash and maturity values.
D. Policyowners have the flexibility of increasing or
B. Investments in Variable Life funds which are fully
decreasing their premiums for regular premiums
invested in units of equity funds are not suitable for
variables life policies.
policyowners who can tolerate the risks of short term
90. Which one of the following statements is FALSE? A fluctuation in their cash value.
C. Policyowners who invest in Variable Life funds with
A. Variable Life insurance policies offer investors high equity investment face greater risk but can expect
policies with values and are indirectly linked to the to achieve higher return than Traditional Life insurance
investment performance of the life company. policies with high equity investment.
B. A life company will carry out a valuation of its funds D. Policyowners who are risk averse should buy
yearly and any surplus may be allocated to Variable Life policies with high equity investment.
participating policyowners as cash dividends.
95. Which statements are FALSE regarding the difference B
C. Both Whole Life and Endowment policies can be
between Endowment policies and Variable Life
used as an investment media with benefits that
policies?
become payable at a future date.
D. The investment element of Variable Life policies
I. The benefits and risks of Endowment and Variable
varies according to the underlying assets of a
Life policies directly accrue to the policyowners.
portfolio.
II. The premiums and benefits of the Endowment
91. Which one of the following statements is NOT TRUE C policies are stated at its inception while those of
about the benefits of investing in a Variable Life Variable Life policies are flexible as they are account
insurance policy? driven.
III. Their policy values directly reflect the performance
A. The fund provides a highly diversified portfolio, thus, of the fund of the life company.
lowering the risk of investment.
B. The fund relieves the investor from the hassles of A. I and II
administering his/her investment. B. I and III
C. The fund ensures definite high yield for an investor C. II and III
since it is managed by professionals who are well- D. I, II and III
versed in the management of risk of the investment
96. Why is it important that the customer must understand B
portfolio.
the sales proposal in full?
D. The fund enables small investors to participate in a
pool of diversified portfolios in which he/she is unlikely
A. Because the insurer does not guarantee any return
to have access to with low investment capital.
B. Because the impact of changes in an investment
92. Which statement about cash is TRUE? C condition on a Variable Life policy is borne solely by
the customer
A. Investment in cash increases when there is a bull C. Because the advisor may give the wrong
run in the stock market. recommendations
B. Investment in cash decreases when there is a rise in D. Because the policyowners expect higher returns
interest rates.
C. Amount invested in cash is dependent on the size of
the cash flow requirement.
D. Its yield potential is high.
97. With traditional participating life insurance products, the allocations to policyowners in the form of dividends D
____________________:

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
98. With traditional participating life insurance products, the allocations to policyowners of dividends: D

I. Are not directly linked to the investments of the life company VUL/ULP LICENSING MANUAL (December 2014) I 39
II. Are smoothened
III. Do not have the highs and lows of investment returns in good times
IV. Are not fixed

A. I and II
B. I, II, and III
C. I, II, IV
D. II and IV
99. Your client is a 35 year-old male, earning P35,000 a month, has savings, and with a moderate risk tolerance. What product D
would you recommend?

A. Participating Whole Life

B. Endowment
C. Term
D. Variable Life