Free RIBO Insurance Laws and Regulations Test 2

Question 1

Variable life insurance policy owners may make a withdrawal in terms of________.

Accepted Answer

Number of units or fixed monetary amount through cancellation of units.

Answer

Variable life insurance policies allow owners to make withdrawals from their cash value. These withdrawals are typically executed by canceling a specific number of units from the underlying investment funds, or by requesting a fixed monetary amount which then results in the cancellation of the corresponding units at their current value. This process reduces the policy's cash value and potentially the death benefit.

Question 2

Which of the following statements about the flexibility features of variable life policies is FALSE?

Accepted Answer

Policy holders can take loans against their variable life policies up to the entire withdrawal value of their policies.

Answer

While variable life policies offer flexibility in withdrawals and fund switching, policy loans are typically limited to a percentage of the policy's cash value, not the entire withdrawal value. Allowing loans up to the full withdrawal value would expose the insurer to excessive risk, especially given the fluctuating nature of the investment-linked cash value. Therefore, the statement that policyholders can take loans up to the entire withdrawal value is false.

Question 3

The investment returns under variable life insurance policy_______. Are not guaranteed. Are Assured Are linked to the performance of the investment fund management by the life company. Fluctuate according to the risk and fall of market price

Accepted Answer

I, III and IV

Answer

The investment returns under variable life insurance policies are explicitly not guaranteed (I) because they are directly linked to the performance of the underlying investment funds (III). Consequently, these returns fluctuate according to the risk and market price changes (IV) of those investments. They are not assured (II) like some traditional policies, as the policyholder bears the investment risk.

Question 4

Which of the following statements are TRUE? The policy value of variable life policies is determined by the offer price at the time of valuation. The policy value of endowment policies is the cash value plus any accumulated dividends less any outstanding loans due at time of surrender. The life company needs to maintain a separate account for variable life policies distinct from the general account.

Accepted Answer

II and III

Answer

Statement I is false because the policy value of variable life policies is determined by the *bid price* of the units, not the offer price. Statement II is true: the policy value of endowment policies includes cash value, accumulated dividends, minus any outstanding loans. Statement III is also true: life companies are legally required to maintain separate accounts for variable life policies to segregate policyholder investments from the insurer's general assets.

Question 5

Which of the following statement is FALSE?

Accepted Answer

Misinterpretation is a specific form of twisting.

Answer

The statement 'Misinterpretation is a specific form of twisting' is false. In fact, twisting is a specific form of misrepresentation, not the other way around. Misrepresentation is a broader term for providing false or misleading information, while twisting specifically involves inducing a policyholder to lapse or surrender an existing policy to purchase a new one, often through misleading comparisons. Therefore, twisting is a *type* of misrepresentation, making the original statement incorrect.

RIBO - Registered Insurance Broker of Ontario Practice Test

RIBO - Registered Insurance Broker of Ontario Practice Test

Free RIBO Insurance Laws and Regulations Test 2