L04 Life insurance products Non Traditional MCQs

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L04 Life insurance products Non Traditional MCQs | Page 1 of 5

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Q1.
What is the primary concern about traditional life insurance products?

a.

Lack of transparency in cash value component

b.

High yield compared to other investments

c.

Easy calculation of rate of return

d.

Transparent method for determining surrender values

Discuss
Answer: (a).Lack of transparency in cash value component Explanation:Traditional life insurance products have a lack of transparency in their cash value component, making it a primary concern.
Q2.
What makes it difficult to ascertain the rate of return on traditional life insurance policies?

a.

Easy comparison with other financial instruments

b.

Immediate knowledge of benefits under "With Profit policies"

c.

Transparent method of calculating surrender values

d.

Timing of benefit realization at the contract's end

Discuss
Answer: (d).Timing of benefit realization at the contract's end Explanation:The rate of return on traditional policies is hard to determine because the value of benefits can only be known when the contract ends.
Q3.
Why is the yield on traditional life insurance policies much lower than that from other investments?

a.

Transparent calculation method for cash value

b.

Competitive rates of return

c.

Lack of a savings element

d.

Rate of return is calculated immediately

Discuss
Answer: (b).Competitive rates of return Explanation:The yield on traditional policies is much lower than other investments due to the competitive rates of return offered by these policies.
Q4.
What is the primary issue with the transparency of cash and surrender values in traditional life insurance products?

a.

Transparency in determining surrender values

b.

Lack of control by the life insurer

c.

Transparent calculation method for cash value

d.

Method of arriving at values set by the life insurer and not transparent

Discuss
Answer: (d).Method of arriving at values set by the life insurer and not transparent Explanation:The primary issue is that the method for arriving at cash and surrender values is set by the life insurer and is not transparent.
Q5.
What are some areas of concern regarding traditional life insurance products?

a.

High yield and transparency in calculation

b.

Transparency in determining rate of return

c.

Transparency in determining surrender values

d.

Cash value component, rate of return, surrender value, and yield

Discuss
Answer: (d).Cash value component, rate of return, surrender value, and yield Explanation:Traditional life insurance products have concerns related to their cash value component, rate of return, surrender value, and yield compared to other investments.
Q6.
What are some features of non-traditional life insurance policies?

a.

Direct linkage with healthcare benefits

b.

Policies that focus on mortality rates

c.

Policies that can beat inflation

d.

Policies with fixed premium amounts

Discuss
Answer: (c).Policies that can beat inflation Explanation:TNon-traditional policies were designed to give returns closer to the inflation rates.
Q7.
Which feature allows customers to have more control over their non-traditional life insurance policies?

a.

Direct linkage with investment gains

b.

Surrender value

c.

Fixed premium amounts

d.

Policies with Flexibility

Discuss
Answer: (d).Policies with Flexibility Explanation:These policies allowed customers to decide, within certain limits, the amount of premium they wanted to pay and the amount of death benefits and cash values they wanted.
Q8.
Why were policies with direct linkage to the capital market designed?

a.

To provide healthcare benefits

b.

To beat mortality rates

c.

To make investment gains

d.

To offer fixed premium amounts

Discuss
Answer: (c).To make investment gains Explanation:Policies with direct linkage to the capital market were designed in an attempt to make investment gains.
Q9.
What is one of the advantages of non-traditional policies?

a.

They offer fixed death benefits

b.

They focus on mortality rates

c.

They allow better surrender values

d.

They cannot beat inflation

Discuss
Answer: (c).They allow better surrender values Explanation:Policies with better surrender values were designed by insurers, which is an advantage of non-traditional policies.
Q10.
Which among the following is a non-traditional life insurance product?

a.

Term assurance

b.

Universal life insurance

c.

Endowment insurance

d.

Whole life insurance

Discuss
Answer: (b).Universal life insurance Explanation:In the context of life insurance products, the term "non-traditional" refers to insurance products that have innovative features and characteristics that differ from the conventional or traditional life insurance policies. Universal life insurance is a non-traditional life insurance product. It offers flexibility in premium payments and the potential to adjust the death benefit and cash values over time, often linked to investment options.
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