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IC REVIEWER

MOCK EXAM SET C


Instructions:
All answers should be placed on the answer sheet provided.

Do not put any marks on this test questionnaire.

In your answer sheet, simply mark an x on the box that corresponds to your answer.

Example:

TEST QUESTIONNAIRE

a. A policy that earns cash values is a

a. Term Plan
b. Family Income Benefit plan
c. Permanent plan
d. Payors Benefit

ANSWER SHEET:

A B C D

NOTE:
If you want to change your answer, encircle the former box then mark an x on the box of
your new answer.

ANSWER SHEET:

A B C D

The correct answer to this question is C for permanent plans because only permanent
insurance plans build up cash values.

You are given 50 minutes to finish the exam. You may start now. Good Luck!

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IC - MOCK EXAM SET C
1. In group insurance, it is assumed that every member of the group is insurable provided that

a. every member of the group can pass the medical examination


b. every member of the group is working a minimum number of hours (usually 30) each week
c. every member of the group is working a minimum number of hours (usually 8) each week
d. every member of the group is working a minimum number of hours (usually 50) each week.

2. An applicant wants a participating policy where the death benefit will be maximized. Which of the
following should be chosen?

a. Extended Term Insurance c. Paid-up Insurance (Reduced Amount)


b. Accumulated dividends d. Paid-up additions

3. Which one of the following statements best describes the Automatic Premium Loan Provisions:

a. a provision whereby a loan up to the amount of the annual premium is automatic.


b. a provision whereby the company lends the insured the amount of a premium to assure that
the non-forfeiture options will be paid.
c. a provision whereby the company automatically pays the premium out of the loan value and
charges it as loan to the insured, if the said premium due is not paid within the grace period.
d. a provision whereby one life insurance company will guarantee payment of the premium to
another life insurance company.

4. The insurance industry is under government regulations because

a. it is required to account for money spent in company operations


b. it pays high taxes
c. it affects public interest
d. it is a charitable institution

5. Group life insurance covers

a. death, provided it is during working hours and in the place of employment.


b. accidental death only
c. death of employee regardless of cause, except suicide during the first year (sometimes two
years)
d. only death by heart attack, pneumonia or cancer

6. A prospect tells you that he wants the maximum possible provision for his retirement with no life
coverage. What would you offer?

a. whole life policy c. a 20-pay life policy


b. a life paid-up at age 65 d. none of the above

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7. Your client tells you that when his father died, he received P500,000 free of Estate Tax and that he
had not even known that the policy existed. Which of the following classifications did your client fall
under?

a. Collateral assignee c. Revocable primary beneficiary


b. Absolute assignee d. Irrevocable primary beneficiary

8. Which of the following is a settlement option?

a. policy loan c. extended term insurance option


b. cash surrender value d. interest on insurance proceeds

9. Which statement is incorrect when the owner borrows on a policy?

a. The policy will lapse if, after reasonable notice, the indebtedness exceeds the cash value.
b. The proceeds of the policy will be reduced by the amount of unpaid loan plus interest, if the
insured dies.
c. Dividends will be reduced by the amount of the current interest.
d. If a large loan is taken after the policy has been in-force for some years, the interest cost may
exceed the premium.

10. The company will allow a policy change from a higher premium to a lower premium plan provided
the insured

a. momentarily assigns the policy to the company


b. obtains written consent from his or her spouse
c. presents satisfactory evidence of insurability
d. buys a new plan altogether

11. A policyholder with a whole life policy has reached the age of 65 and does not want to go on paying
premiums, but wants to remain insured for life. Which of the following would he take?

a. Extended Term Insurance c. Paid-up Insurance (Reduced Amount)


b. Accumulated dividends d. Paid-up additions

12. A man made his wife his irrevocable beneficiary and if she died before him then his children were
each named as irrevocable beneficiaries. Which of the following best describes the classification of
the children?

a. Revocable secondary beneficiary c. Revocable primary beneficiary


b. Irrevocable secondary beneficiary d. Irrevocable primary beneficiary

13. All of the following are true except:

a. Non-forfeiture values are guaranteed


b. Non-forfeiture values are present in all permanent forms of insurance
c. The cash value may be more than the face amount of a policy
d. There are no automatic non-forfeiture provisions in life insurance

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14. Mr. Martinez walked out of his house one night and was never heard from again. His wife wanted to
make a claim on his life insurance policy, as she believes he is already dead. Which of the following
statements is correct in this case?

a. The company would pay immediately


b. It would require 6 months before the court could declare him dead
c. It would be 4 years before the court could declare him legally dead
d. It would be 7 years before the court could declare him legally dead

15. The widow of your policyholder tells you that she does not want a lump sum payment but, she
would like to receive a monthly allowance for the rest of her natural life. Which option do you
recommend?

a. interest option c. periodic annuity option


b. fixed income option d. life annuity option

16. Most binding receipts or binding certificates have the following provision except:

a. a maximum amount of coverage


b. the right of the company to terminate the initial coverage if the application is disapproved by
the company
c. an acknowledgement of the receipt of the initial contractual premium
d. a minimum amount of coverage

17. Which of the following statements is NOT correct?

a. When a policy lapses, the agent loses all future commissions on renewal premiums
b. Too many lapsed policies can cause an Agents Agreement to be cancelled
c. When a policy lapses, the agent loses a valuable source of prospects
d. Agents with persistent business seldom stay long with one company

18. Which of the following statements is correct?

a. Orphan policyowners will only deal with their original agents.


b. Orphan policyowners hardly need an agents services
c. It does not pay to service orphan policyowners
d. Orphan policyowners are good sources of prospects and new sales

19. One requirement a policyowner must meet in order to reinstate a life insurance policy is to

a. furnish evidence of insurability which is satisfactory to the insurance company


b. pay future premiums at the rate for his or her attained age at the time of reinstatement
c. agree to apply future policy dividends toward the payment of premium
d. assign the policy collaterally to the insurance company for the amount of the overdue
premiums plus any outstanding policy loan

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20. A father has his present life insurance payable to his estate and because he has now retired he
wants to pass the policy on to his son who will assume the premium payments. Which of the
following will he have to appoint his son to achieve his desire and to protect the son from Estate
Tax?

a. Collateral assignee c. Revocable primary beneficiary


b. Irrevocable primary beneficiary d. Absolute assignee

21. If a policyholder elects to take the Extended Term Insurance option on a 20-year endowment policy
where the cash value is more than sufficient to provide the term coverage to maturity, in which of
the following ways would the excess funds be used?

a. To make an immediate cash payment equal to the maturity amount of the pure endowment
b. To increase the period of coverage
c. To provide a pure endowment at maturity
d. To be forfeited

22. Non-forfeiture options are included in whole life and endowment policies to assure the policyowner
that certain minimum policy benefits shall remain with him even under certain changed conditions.
Non-forfeiture values guarantee the policyholder that

a. The face amount of the policy will remain the same even if the insureds health becomes
impaired
b. The premiums on the policy will remain the same even when another beneficiary is added to
the policy
c. Any guaranteed policy values will belong to the policyowner even if premium payments are
discounted
d. No death claim will be denied for any misstatement on the application

23. A misrepresentation in the application form is considered to be material if

a. the insurance company disregarded the misrepresentation


b. the insured died during the contestable period
c. the misrepresentation is subsequently discovered by the insurance company
d. the insurance company would have altered its risk appraisal decision had the truth been
known

24. The term Quality business refers to those policies which

a. are persistent and demonstrate a good mortality experience


b. are solicited by an agent during his first call on a prospect
c. carry a hefty rate of premium per thousand of insurance
d. do not require a medical examination

25. If the person whose life is insured dies during the grace period and the premium was not paid, the
amount that the insurance company will pay to the beneficiary is usually the

a. cash surrender value of the policy minus the unpaid premium


b. full face amount of the policy
c. total premiums paid up to the date of death plus interest
d. face amount of the policy minus the unpaid premium

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26. The beneficiary, a widow, wishes to pay off the remaining balance of a 15-year mortgage. Which of
the following options do you recommend?

a. Fixed income option c. Interest option


b. Periodic annuity option d. None of the above

27. In order to have vested interest in a life insurance policy while the insured person is still alive, a
beneficiary must have been named

a. a preference beneficiary c. a revocable beneficiary


b. the primary beneficiary d. a guaranteed renewable policy

28. The conservation of a life insurance policy is dependent on all of the following except

a. quality of agents prospecting habits c. the use of effective needs selling


b. level of first year commission d. agents service oriented attitude

29. In practice, most claims for death benefits of life insurance policies are

a. investigated thoroughly for evidence of misrepresentation or fraud before payment is made


b. paid on the first policy anniversary after the death of the insured
c. settled by interpleader proceedings
d. paid promptly as soon as properly completed forms are received by the company

30. Generally, a reinstatement application will be accepted from the owner of a lapsed insurance policy

a. anytime during the lifetime of the insured


b. within the period of 3 or 5 years after the date of lapse as specified in the policy
c. any time within the extended term insurance period regardless of length
d. only on a premium due date or during the grace period of an unpaid premium

31. In most Companies the agents role in marketing group life insurance is limited to

a. making the necessary appointment for the home office group marketing people
b. preparing the group sales proposal
c. repeat business is persistent business
d. losses due to lapses are negated by savings in agents commissions

32. A client has a policy with you for P1,000,000 which is payable to his estate and he tells you that he
wants his wife to receive the money free from Estate Tax. You recommend that he

a. appoint an irrevocable beneficiary


b. take out a new policy with the bank as a third party
c. make an absolute assignment
d. make a collateral assignment

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33. A policy loan taken by the owner of a life insurance policy

a. need not be paid during the insureds lifetime, but interest charges will accumulate on the
outstanding loan balance
b. need not be paid during the insureds lifetime and no interest will be charged if partial
repayments are made periodically
c. must be repaid at the end of a specified period, but no interest will be due if the loan is repaid
before that time
d. must be repaid with interest, within a period measured from the time the loan is made, as
specified in the policy

34. All of the following apply under the beneficiary provision, except

a. the beneficiary can only receive the policy proceeds if he is alive at the time of the insureds
death
b. the interest of the contingent beneficiary remains inoperative during the lifetime of the primary
beneficiary
c. the beneficiary must notify the Company of the insureds death within 24 hours
d. an irrevocable beneficiarys interest is very similar to that of an absolute assignee

35. The following statements concerning insurable interest are correct, except:

a. It is not important for purposes of underwriting the risk


b. Everyone has an Insurable Interest in his own life
c. It is deemed to exist if economic loss occur at the death of the insured
d. It is deemed to exist by virtue of relationship by blood or marriage

36. Insurable interest must exist

a. at the inception of the policy


b. throughout the premium paying period
c. until the maturity date of the policy
d. for as long as the insurance policy remains in force

37. A non-forfeiture option would ordinarily be selected at the time a policyowner

a. discontinues premium payments for a whole life or endowment policy


b. chooses a mode of settlement for the policy proceeds
c. converts a term policy to a whole life policy
d. renews a term policy

38. In case where the premium has not been paid and the cash value has been exhausted, the policy
can still avail of

a. Extended Term Insurance Provision c. Grace period


b. Automatic Premium Loan Provision d. The Reinstatement Provision

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39. When the beneficiary of a life insurance policy has been designated irrevocably, the policyowner
must obtain the consent of the beneficiary in order to

I. name a different person to receive policy benefits


II. obtain a loan under the policy
III. surrender the policy for its cash value
IV. elect the extended term non-forfeiture option

a. all of these c. I, III, and IV


b. I, II, and III d. II, III, and IV

40. Mr. Barrio has been insured under the employee group life insurance plan for several years. If he
leaves his job, Mr. Barrios group life insurance will

a. terminate as of the date he leaves


b. be changed, upon the employers notice to the insurance company, to a permanent plan of
insurance for the same amount
c. continue to provide coverage of the same amount for a period of 31 days during which Mr.
Barrio can convert to an individual policy
d. cover him for a reduced amount of paid-up term insurance until the end of the current year

41. You visit a prospect who tells you that he does not believe in life insurance because when his
mother died, he was beneficiary under her life policy and most of the money went to pay Estate
Taxes because her agent made a mistake. Only this man and his sister were named in the policy.
Which of the following did they fall under?

a. Absolute assignee c. Revocable secondary beneficiary


b. Irrevocable primary beneficiary d. Revocable primary beneficiary

42. The Insurance Commissioner has the power to revoke or refuse to renew an agents license in all
the following except

a. When the Agent makes any material misstatement in his application for his license
b. When the Agent makes any material misrepresentation to his policyholders of the amount of
commissions that he has made or may make on a particular insurance contract
c. When the agent diverts any premium collection for his personal use
d. None of the above

43. The Insurance Commissioner has the power to revoke or renew an agents license in all of the
following instances except

a. When the agent has diverted any premium collection for his personal use
b. When the Agent influences the applicants choice of plan to be purchased
c. When the applicant for a license has intentionally withheld information concerning his
conviction of a crime involving moral turpitude
d. None of the above

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44. Which of the following statements is NOT correct?

a. The Company loses income from lapsed policies and, therefore, it does not sufficiently cover
the selling cost
b. The Company with a low persistency rate is unable to maintain competitive premium rates
c. When a policy lapses, the Company is unable to maximize its objective which is the formation
of long term capital for national development
d. When a policy lapses, the Company neither gains nor loses since it ceases to carry the risk of
covering the insured

45. In life insurance, there is always an agency relationship between the

a. beneficiary and the insurance company


b. insured and the insurance company
c. soliciting agent and the insurance company
d. policyowner and the soliciting agent

46. The commuted value of an insurance policy is

a. the cash value of basic addition


b. the single sum of money which is equal in value to the discounted future payments
c. the cash value of the policy after the loan has been deducted
d. the paid-up value of the policy

47. For a given policy, the total of twelve monthly premiums is greater than the annual premium. Which
of the items below is not a reason for this?

a. Interest is lost by not having the full premium in advance


b. Increased collection cost
c. The company has to pay considerable documentary stamp at issue
d. Premiums are calculated on an annual basis

48. Which of the following statements is NOT correct with respect to the reinstatement process?

a. an application for reinstatement must be submitted


b. payment of back premiums with interest
c. assumption or repayment of any indebtedness
d. written assurance of intent to keep the policy in force

49. The requirement that the beneficiary should have an insurable interest in the insured is satisfied if
the insured

a. and the beneficiary are engaged in a similar occupation


b. belongs to the same club as the beneficiary
c. is financially indebted to the beneficiary
d. and the beneficiary regularly travel to and from work in a car pool arrangement

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50. The owner of a life insurance policy is permitted to designate both a primary and a contingent
beneficiary. The contingent beneficiary is the person whom the owner wants to receive the policy
proceeds if the primary beneficiary

a. is ruled legally incompetent at the time of the insureds death


b. dies before receiving all the installments due under the settlement option
c. is a minor at the time of the insureds death
d. dies before the person whose life is insured

51. In order for an assignment of a life insurance policy to be binding upon the company

a. it must be made in writing and filed with the company


b. it must be of the limited type
c. the company must be satisfied that it is justified
d. the company must certify to its validity

52. Which of the following statements is not true of an Absolute Assignment?

a. It is the transfer of the legal right or interest in a policy to another party


b. An irrevocable beneficiary must agree to an absolute assignment
c. The insurer must agree to an absolute assignment
d. The policy holder may discontinue premium payments

53. The settlement option provision may provide all of the following except

a. payment of proceeds over a fixed period


b. payment of the proceeds for the life of the insured
c. proceeds held by the Company with interest payable to the beneficiary on request
d. payment of the proceeds in fixed amounts until exhausted

54. In developing a life insurance policy, the company must accumulate from premium payments a fund
required to meet the contract obligations. This fund is called

a. dividend fund c. accrued discount


b. policy reserve d. contingency fund

55. A Retirement Annuity is

a. an arrangement where a person can pay a life insurance company a sum of money in return
for a pension for life
b. a special kind of medical examination that has to be repeated every year
c. a kind of regular annual savings arrangement to provide a pension for life with no life
coverage
d. a one-time payment for a pension to start at a pre-determined date

56. The incontestability clause

a. permits the Company to pay claims within two years


b. gives the Company the right to rescind
c. prevents the Company from denying a claim after the policy has been in force for two years
d. makes it necessary for the beneficiary to present proof of death in the event of a death claim

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57. Amy is designated as the revocable beneficiary of an insurance policy on her husband Romys life.
While Romy is alive, Amy

a. has a mere expectancy in relation to the insurance proceeds


b. must give her consent to any change in the settlement arrangements
c. holds a vested interest in the policy proceeds
d. has veto power over Romys exercise of ownership rights

58. Life Insurance policy loans are limited to an amount which with interest will not exceed the

a. cash value of the policy c. net amount of risk


b. total premium paid d. present value of future premium

59. If the interest on a policy loan is not paid at the policy anniversary the Insurance Company may

a. terminate the contract c. refuse to grant future additional loans


b. demand full settlement of the loan d. increase the present loan by the interest

60. An insurance company generally has the right to rescind a life insurance policy if the

a. company discovers at any time that the policyowner was actually a minor at the time of
application
b. insured person intentionally kills himself during the suicide exclusion period specified in the
policy
c. insured person is killed in military action during the contestable period of the policy
d. company discovers during the contestable period of the policy that the application contains a
material misstatement

-end of Set C-

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