L04 Life insurance products Non Traditional MCQs

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L04 Life insurance products Non Traditional MCQs | Page 4 of 5

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Q31.
What is the primary determinant of benefits under Unit Linked Insurance policies?

a.

Policyholder's preferences

b.

Number of units in the investment fund

c.

Market value of units at the claim payment date

d.

Life insurance company's assumptions

Discuss
Answer: (c).Market value of units at the claim payment date Explanation:Benefits under Unit Linked Insurance policies are determined by the market value of units credited to the policyholder's account at the claim payment date.
Q32.
What is the significance of unit creation in Unit Linked Insurance?

a.

It determines premium amounts

b.

It reduces investment flexibility

c.

It allows for transparent pricing

d.

It divides the investment fund into equal parts

Discuss
Answer: (d).It divides the investment fund into equal parts Explanation:Units are created by dividing an investment fund into equal parts in Unit Linked Insurance.
Q33.
How does Unit Linked Insurance ensure a transparent structure?

a.

By offering guaranteed returns

b.

By specifying charges for insurance and expenses

c.

By providing unlimited investment choices

d.

By linking benefits to the life insurer's investments

Discuss
Answer: (b).By specifying charges for insurance and expenses Explanation:Unit Linked Insurance maintains a transparent structure by clearly specifying charges for insurance cover and expenses.
Q34.
What is the key difference in the pricing of initial costs between traditional policies and Unit Linked Insurance?

a.

Initial costs are higher in Unit Linked Insurance

b.

Initial costs are higher in traditional policies

c.

Initial costs are equally distributed in both types

d.

Initial costs do not impact the policy pricing

Discuss
Answer: (b).Initial costs are higher in traditional policies Explanation:In traditional policies, initial costs are spread throughout the policy term, making them higher, while in Unit Linked Insurance, these costs are deducted from the initial premiums.
Q35.
What is the key difference in the pricing of initial costs between traditional policies and Unit Linked Insurance?How is the death benefit calculated in Unit Linked Insurance?

a.

Initial costs are higher in Unit Linked InsuranceIt is a fixed amount determined by the insurer

b.

Initial costs are higher in traditional policiesIt is based on the premiums paid

c.

Initial costs are equally distributed in both typesIt is a multiple of the fund value

d.

Initial costs do not impact the policy pricingIt is the same as the Sum Assured

Discuss
Answer: (b).Initial costs are higher in traditional policiesIt is a multiple of the fund value Explanation:In traditional policies, initial costs are spread throughout the policy term, making them higher, while in Unit Linked Insurance, these costs are deducted from the initial premiums.In Unit Linked Insurance, the death benefit is a multiple of the fund value (unit price multiplied by the number of units) or the Sum Assured, whichever is higher.
Q36.
Who bears the investment risk in Unit Linked Insurance?

a.

The life insurer

b.

The policyholder

c.

The beneficiaries

d.

The government

Discuss
Answer: (b).The policyholder Explanation:In Unit Linked Insurance, the policyholder bears the investment risk because the value of units depends on the life insurer's investments, which are not guaranteed.
Q37.
What is the primary factor that determines the benefits under ULIP policies?

a.

The policyholder's preferences

b.

The insurance company's assumptions

c.

The value of units credited to the policyholder's account

d.

The performance of investment funds

Discuss
Answer: (c).The value of units credited to the policyholder's account Explanation:Benefits under ULIP policies are determined by the value of units credited to the policyholder's account.
Q38.
What is the key advantage of the transparent structure of ULIPs?

a.

Lower premium costs

b.

Better investment performance

c.

Clearly specified charges for insurance cover and expenses

d.

Guaranteed returns on investment

Discuss
Answer: (c).Clearly specified charges for insurance cover and expenses Explanation:The transparent structure of ULIPs includes clearly specified charges for insurance cover and expenses, providing policyholders with transparency.
Q39.
How are initial costs managed in ULIPs compared to traditional policies?

a.

Spread throughout the policy term in ULIPs

b.

Deducted from the initial premiums in ULIPs

c.

Covered by the insurance company in ULIPs

d.

Not applicable to ULIPs

Discuss
Answer: (b).Deducted from the initial premiums in ULIPs Explanation:Initial costs are deducted from the initial premiums in ULIPs, reducing the amount allocated for investment.
Q40.
How is the death benefit calculated in ULIP policies?

a.

Fixed and predetermined

b.

A percentage of the premium paid

c.

A multiple of the premiums paid

d.

A lump sum regardless of premiums paid

Discuss
Answer: (c).A multiple of the premiums paid Explanation:In ULIP policies, the death benefit is a multiple of the premiums paid, unlike traditional policies where it is often a fixed sum.
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