The life insurance industry is under government supervision because
a. It affects public interest
b. It pays such high taxes
c. It is required to account for money spent in company operations
d. It is a charitable institution
ANSWER: a. It affects public interest.
An agent is prohibited from doing all of the following practices EXCEPT to
a. Make complete comparison of the policies he sells and those offered by competing insurance companies
b. Alter an application without the applicant’s prior written approval
c. Refund some of his commission to his client
d. Convince a prospect to cancel his policy in one insurance company to buy a policy from the insurance company represented by the agent
ANSWER: a. Make complete comparison of the policies he sells and those offered by competing insurance companies.
In most life insurance applications, the largest amount of information requested is data which
a. Describes the desired benefits and mode of payment
b. Identifies the applicant
c. Describes the type of insurance applied for
d. Relates to the insurability of the applicant
ANSWER: d. Relates to the insurability of the applicant.
All of the following policies can be used to afford retirement income EXCEPT
a. Endowment at age 60
b. Term to age 65
c. Limited payment life
d. Whole life
ANSWER: b. Term to age 65.
The requirement that the beneficiary should have an insurable interest in the insured is satisfied if the insured
a. And the beneficiary regularly travel to and from work in a car pool arrangement
b. Is financially indebted to the beneficiary
c. And the beneficiary are engaged in a similar occupation
d. Belongs to the same club as the beneficiary
ANSWER: b. Is financially indebted to the beneficiary.
Insurable interest must exist
a. Throughout the premium paying period
b. At the inception of the policy
c. Until the maturity date of the policy
d. For as long as the insurance policy remains in force
ANSWER: b. At the inception of the policy.
Which of the following best describes a pure endowment policy
a. It pays proceeds to the insured only if he lives to the end of a specified period
b. It pays proceeds to the insured if he lives to the end of the endowment period or pays the face amount to the beneficiary if he dies before the end of the endowment period
c. It is a combination of endowment insurance and term insurance
d. None of these statements
ANSWER: a. It pays proceeds to the insured only if he lives to the end of a specified period.
Participating life insurance policies are policies which
a. Develop profit which must be paid to stockholders
b. Allow variation in the wording of certain provisions
c. Permit beneficiaries to exercise certain ownership rights during the lifetime of the insured
d. Provide for the distribution of dividends to the policyowner
ANSWER: d. Provide for the distribution of dividends to the policyowner.
Mr. Sy walked out of his house one night and was never heard of again. His wife wanted to make a claim on his life insurance policy. Which statement is correct
a. The company would pay immediately
b. It will take four years before the court could declare him legally dead
c. It will take seven years before the court could declare him legally dead
d. It would require six months before the court could declare him dead
ANSWER: c. It will take seven years before the court could declare him legally dead.
The following statements concerning insurable interest are correct EXCEPT
a. It is deemed to exist by virtue of a relationship by blood or by marriage
b. It is important for purposes of underwriting the risk
c. It is deemed to exist if economic loss would occur at the death of the insured
d. Everyone has an insurable interest in his own life
ANSWER: b. It is important for purposes of underwriting the risk.
A policy that is in force for less than the original sum assured with no indebtedness has availed of
a. Cancellation
b. Grace period
c. Reinstatement provision
d. Paid up insurance option
ANSWER: d. Paid up insurance option.
An applicant wants a participating policy with maximum cash available for emergencies. Which should he select
a. Loan value
b. Paid up addition
c. Accumulated dividends
d. Extended term insurance
ANSWER: c. Accumulated dividends.
Which of the following is false
a. When an agent makes a sales presentation he has to sell confidence in the product
b. The job of an agent is to squeeze as much money as possible out of making a new sale
c. The primary job of an agent is to get people happily involved with the ownership of his policy
d. When an agent meets a prospect for the first time he has to sell confidence in himself
ANSWER: b. The job of an agent is to squeeze as much money as possible out of making a new sale.
Insurable interest is necessary when a person insures another
a. Because interest on premiums must be earned
b. So that the person being insured may be properly appraised
c. To establish that there is a genuine risk
d. To make sure that he will pay the premiums
ANSWER: c. To establish that there is a genuine risk.
The conservation of a life insurance policy is dependent on all of the following EXCEPT
a. Effective needs selling
b. Agent’s service oriented attitude
c. The level of first year commission
d. Quality of agent’s prospecting habits
ANSWER: c. The level of first year commission.
The grace period provision in life insurance policies is designed to
a. Give the insured more time to pay the premium while coverage remains in force
b. Compel the insured to pay premiums more promptly
c. Terminate the contract automatically
d. Permit the company to impose extra charges
ANSWER: a. Give the insured more time to pay the premium while coverage remains in force.
A retirement annuity is
a. A regular annual savings arrangement to provide a pension for life with no life coverage
b. An arrangement where a person pays a life insurance company a sum of money in return for a pension for life
c. A special kind of medical examination repeated yearly
d. A one time payment for a pension to start at a predetermined date
ANSWER: b. An arrangement where a person pays a life insurance company a sum of money in return for a pension for life.
One requirement to reinstate a life insurance policy is to
a. Apply future dividends to premium payments
b. Furnish evidence of insurability satisfactory to the insurer
c. Pay premiums based on attained age
d. Assign the policy to the insurer
ANSWER: b. Furnish evidence of insurability satisfactory to the insurer.
Life insurance is
a. A speculative risk
b. A cooperative risk sharing plan
c. Only available to a specific group
d. Paid up insurance
ANSWER: b. A cooperative risk sharing plan.
Which is the least important reason for licensing insurance agents
a. Government control over agent conduct
b. Protection of the public
c. Maintain ethical standards
d. Provide additional government income through license fees
ANSWER: d. Provide additional government income through license fees.
The level premium system means the
a. Premium remains the same each year
b. Mortality rate remains the same each year
c. Face amount remains the same each year
d. Policy reserves increase equally each year
ANSWER: a. Premium remains the same each year.
Limited payment life policies are called such because they
a. Limit the conditions under which policies are payable
b. Limit the number of beneficiaries
c. Shorten the benefit payment period
d. Limit the period during which premiums are payable
ANSWER: d. Limit the period during which premiums are payable.
During waiver of premium for disability, the cash value of the policy will
a. Stop increasing
b. Decrease but dividends continue
c. Remain the same
d. Increase and dividends continue
ANSWER: d. Increase and dividends continue.
The only instance when a life insurance contract is treated primarily as an indemnity agreement is when
a. A person insures the life of his spouse
b. A creditor insures the life of his debtor
c. A person insures a friend
d. A partner insures another partner
ANSWER: b. A creditor insures the life of his debtor.
