AK_IC - MOCK EXAM SET A

1. Mr. Kho’s participating whole life insurance policy includes a waiver of premium for disability benefit.
During the period when premium payments are being waived under this provision, the cash value of
this policy will

a. increase and Mr. Kho will continue to receive policy dividends

b. decrease but Mr. Kho will continue to receive policy dividends
c. remain the same and Mr. Kho will continue to receive policy dividends
d. stop increasing for the term of the rider

2. An applicant wants to get a participating policy which will have the maximum cash available for
emergencies. Which of the following should he select?

a. loan value c. accumulated dividend

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b. extended term insurance d. paid-up addition

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3. A whole life policy provides

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a. the highest level of savings for the insured within a specified term of years
b.
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protection for life of the policyholder with premiums payable for a limited term of years
low cost protection only for a limited term of years with no savings
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d. protection with premiums payable for life and a low level of savings as an alternative
to continued protection in old age
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4. A prospect tells you that he wants the highest coverage possible for the least annual cash outlay.
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Would you offer him

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a. a whole life policy? c. a term policy?

b. an endowment policy? d. a 20-pay life policy?

5. A company can restrict its liability if death occurs as a result of an aviation accident. The aviation
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exclusion clause usually applies to which of the following?

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a. anybody in an aircraft flight

b. only for pilots
c. anybody aboard an aircraft in flight who has duties aboard the aircraft
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d. anybody in the aviation industry who works around or in the aircraft

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6. A Family Income Rider is specifically designed to

a. pay twice the face amount of the policy in the event of death
b. provide a monthly income from the date of death of the insured to some future date
specified in the contract
c. provide an income for the adjustment period immediately following death
d. provide a retirement income for the insured and his spouse

7. A prospect tells you that he wants to be insured for life but he does not want to pay premiums after
he retires at age 65. Would you offer him

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

b. an endowment policy? d. a life paid-up at age 65 policy?

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 8. A prospect tells you that he wants to be insured at age 65 but he does not want to pay more than
the minimum possible level of premiums. Would you offer him

a. a whole life policy? c. a term policy?

b. an endowment policy? d. a life paid-up at age 65 policy?

9. A prospect tells you that he wants to be insured for life at the least annual cost until he dies. What
would you offer him?

a. a whole life policy c. a term policy

b. an endowment policy d. a 20-pay life policy

10. Limited payment life policies are called such because these policies

a. limit the conditions under which the policies are payable

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b. shorten the period when benefits may be paid

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c. limit the period during which premiums are payable

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d. limit the number of beneficiaries thereby minimizing problems of paying too many people

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11. All of the following are correct statements except:

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a. rs e
premiums for whole life insurance are less than for endowment policies
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b. the cash value of a 20-year endowment policy are greater than those of a whole life policy
c. whole life insurance and endowment insurance serve different purpose
d. there is a higher risk element for the insurance company involved in connection with
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endowment policies than with whole life policies

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12. At the end of 25 years, which statement is true for a 25-Pay Life and is not true for a 25-Year
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endowment?

a. No further premiums are paid c. The sum insured is paid

b. The contract is terminated d. The insurance remains in force
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13. All of the following policies can be used to afford retirement income except:

a. endowment age 60 c. limited payment life

b. whole life d. term to age 65
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14. A term policy provides

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a. the highest level of savings for the insured within a specified term of years
b. protection for the life of the policyholder with premiums payable for a limited term of years
c. low cost protection only for a limited term of years with no savings
d. protection with premiums payable for life and a low level of savings as an alternative to
continued protection in old age

15. Applicants for life insurance with moderate physical impairments are called sub-standard risks and

a. therefore cannot obtain life insurance in any company

b. may be insured at increased rates to compensate for the extra hazard
c. are issued policies without any non-forfeiture option
d. are required to pay premiums on an annual basis

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 16. A policy requiring the payment of premiums through life, or until the cash value equals its face value
at age 100 is called

a. an income endowment policy c. an unlimited payment life

b. a limited pay life policy d. an ordinary life policy

17. A prospect tells you that he has a loan with a financial institution and he would like an insurance
company to pay it off if he dies, but, he is hard-up and he wants this coverage at the lowest possible
cost. Would you offer him

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

b. a term policy? d. a life paid-up at age 65 policy?

18. Which of the following statements is incorrect?

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a. The cash value of a whole life policy builds up at a slower rate than for a 20 year

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endowment

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b. The cash value of an endowment builds up faster than that of a limited pay life policy of the
same duration

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c. Because of its very short duration the cash value of a yearly renewable term policy
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grows very fast
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d. The cash value in a permanent policy is guaranteed by the Company

19. In a child insurance policy, the Parent Waiver Clause is?

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a. Double Indemnity Rider

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b. Guaranteed Insurability
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c. Child Insanity Rider

d. Total Disability Waiver of Premium Rider

20. A person’s human economic value is defined as the

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a. total value of his physical assets

b. the amount of capital required to replace family income needs
c. total value of assets and any future earnings derived therefrom
d. total value of the individual’s tax contribution to the national economy
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21. In order for life insurance premiums to be waived under a typical waiver of premium for disability
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clause, the disability of the insured person must be total and the disability must

a. be expected to continue until death

b. have continued for a specified period, such as six months
c. have been caused by illness of a chronic nature, not accident
d. have been caused by accident not by illness

22. Insurance provides protection against economic loss by enabling the policyowner to

a. transfer responsibility for the loss to others

b. take speculative risk to compensate for the loss
c. reduce the possibility of the occurrence of the event causing the loss
d. share the loss with others exposed to a similar risk

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 23. Life insurance guarantees cash benefits for all of the following except

a. clean-up fund
b. family dependency period income
c. educational fund
d. mortgage

24. Participating life insurance policies are policies which

a. allow variation in the wording of certain provisions

b. provide for the distribution of dividends to the policyowner
c. develop profit which must be paid to stockholders
d. permit beneficiaries to exercise certain ownership rights during the lifetime of the insured

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25. Non-productive agents in a company affect

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a. profit allowance c. mortality

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b. risk sharing d. expense control

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26. All of the following are sources of underwriting information except:
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a. medical examination report
b. agent’s confidential report
c. government tax records
applicant’s personal appearance
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d.
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27. Under an endowment policy, if the person whose life is insured survives to the end of the period
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stated in the policy, the

a. policy will terminate without value

b. face amount will be paid
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c. policy will automatically be converted to paid-up whole life policy

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d. the extended term insurance option will go into effect

28. When the death benefit of a policy is restricted in amount during the early years of the policy, this
restriction is known as
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a. rate adjustment c. lien

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b. an increasing death benefit d. a subtractive clause

29. In theory, endowment insurance is a combination of

a. level term and pure endowment

b. increasing term and whole life insurance
c. level term and whole life
d. increasing term and decreasing whole life

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 30. Some insurance companies charge females a lower premium rate than males. Which of the
following reasons justifies that practice?

a. women are less likely to lapse their policies

b. generally women have less hazardous jobs
c. women have longer life expectancy than men
d. generally women buy the higher premium policies

31. The premium for a participating life insurance policy is

a. the same as a non-participating policy

b. greater at younger ages
c. lower than a non-participating policy
d. higher than a non-participating policy

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32. The information on a life insurance application relating to an applicant’s birthday, occupation, and

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avocation is used by the company primarily for the purpose of:

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a. appraising the risk

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b. assigning the risk
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determining the insurable interest
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d. determining a suitable plan of insurance

33. Which of the following statements is NOT correct?

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a. When an agent meets a prospect for the first time, he has to sell confidence in himself
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b. When an agent makes a sales presentation, he has to sell confidence in the product
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c. The primary job of an agent is to get people happily involved with the ownership of his policy
d. The primary job of an agent is to squeeze as much money as possible out of making
a new sale
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34. The level premium system means the

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a. face amount of insurance premium remains the same each year

b. policy reserves increase by the same amount each year
c. premiums remain the same each year
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d. mortality rate remains the same each year

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35. All of the following term policies can be sold as a basic policy contract except

a. yearly renewable term c. ten year term

b. six-month interim term d. decreasing term

36. A life insurance agent is permitted to

a. approve an application for insurance

b. waive any of the requirements of the Company
c. guarantee dividends on participating policies
d. prepare routine proposals for life insurance coverage

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 37. Life insurance companies practice risk selection primarily to

a. guard against anti-selection

b. establish dividend rates on participating policies
c. determine policy reserve amount
d. gather and test mortality statistics

38. An Individual, at age 35, purchases a policy under which he will in 20 years receive the face amount
of the policy himself if he is still alive at that date. This policy is obviously a

a. 20 Yr. Endowment c. 20 Yr. Term

b. 20 Pay Life d. None of the above

39. In determining the number of people dying or living at a particular age within a given period, we use

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the principle of:

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a. probability c. mortality table

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b. insurable interest d. risk sharing

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40. Which of the following statements about Disability Waiver of Premium Rider is incorrect?
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a. There is a waiting period
b. The disability must occur before a stated age
c. The insured has to die while disabled
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d. It has to be attached to a life insurance policy

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41. A housewife without gainful employment applies for a P 500,000 life coverage. Which of the
following should the agent do?

a. be grateful
b. examine the adequacy of the husband’s insurance coverage
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c. suggest she double the amount

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d. tell her she has no need for it

42. The total life coverage of a permanent basic policy can be greatly increased through the use of
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a. an interim term rider

b. an accidental death benefit rider
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c. a supplemental term rider

d. a cancer rider

43. If premiums are being waived under a waiver of premium benefit and the insured dies, the proceeds
will be

a. reduced paid-up face amount

b. face amount less unpaid premiums
c. cash surrender value
d. face amount

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 44. The full face amount is received by the insured himself

a. when he becomes 65 years of age in the case of a whole life policy

b. on the date of maturity in the case of endowment policy
c. only if he lives to 100 years of age in the case of an endowment
d. when he becomes 65 years of age in the case of limited pay life

45. A parent taking a life insurance policy on his minor child wishing to provide that the policy will
continue in force in the event of his own death, would apply for

a. term insurance
b. total and permanent disability clause
c. family income provision
d. payor insurance benefit

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46. If a policyholder changes his occupation without notifying the company, might it affect the benefits

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under his policy?

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a. No, benefits and premiums may only be changed at the renewal date of the policy

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b. Yes, unless the policy specified otherwise, if he engaged in a more hazardous occupation,
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his benefits may be prorated
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c. No, benefits agreed upon at the inception of the policy may not be changed
d. None of the above
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47. The fundamental advantage of the use of insurance as a means of meeting economic losses is that
through insurance these losses are
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a. spread over a large number of people

b. deferred for a specified period of time
c. reduced for the group as a whole through the multiplier effect
d. met as they arise through savings accumulated on an assessment basis
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48. For the waiver of premium to be effective

a. disability must be total

b. disability must be permanent
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c. both a & b
d. either a or b
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49. Because the renewal of a term life insurance policy presents an increased possibility of anti-
selection, it is customary for the insurance company to

a. require some evidence of insurability each time the policy is renewed

b. charge higher premium rates for term policies that are renewable than for those that
are not renewable
c. restrict the policyowner’s right to change the beneficiary on a renewable term policy
d. define insurable interest more strictly for term policies than for other policies

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 50. A businessman has arranged for a development loan which will be available one year from now.
Because he is unable to wait until then he has arranged an interim loan with his bank. The only
problem is that the bank wants the loan secured against the risk of his death. What is the most
economic arrangement that you can recommend?

a. extended term c. interim term

b. decreasing term d. yearly renewable term

51. A Pure Endowment policy

a. pays proceeds to the insured only if he lives to the end of a specified period
b. pays proceeds to the insured if he lives to the end of endowment period, or pays the face
amount to the named beneficiary if the insured dies before the end of the endowment period
c. is actually a combination of endowment insurance and term insurance

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d. none of the above

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52. Substandard premium rates are charged for

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a. applicants who are better than average risks

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b. policies that carry a lower than usual interest rate
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applicants who carry a higher health or occupational risk
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d. applicants who desire low premiums

53. An insurance company which is owned and controlled by the policyowners who also share in the
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earnings of the insurance company in the form of dividends is known as

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a. stock company c. domestic company

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b. foreign company d. mutual company

54. “Critical years” in the programming of life insurance means:

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a. retirement years
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b. years between the time the youngest is 15 years old and the mother is 62 years old
c. years immediately following the death of the insured
d. period during which the children are small and cannot provide for themselves
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55. The consideration required by the life insurance company to make the insurance coverage effective
is the
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a. beneficiary’s continuing insurable interest in the life of the insured

b. payment of the initial premium
c. applicant’s promise to act in good faith
d. payment of each renewal premium before the end of the applicable period

56. 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

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 57. In a Life Insurance Company, risk appraisal is necessary to

a. project dividend rates for participating policies

b. prevent any anti-selection
c. collate mortality statistics
d. calculate the mortality rate for a given policy

58. A limited pay life policy provides

a. protection for the life of the policyholder with premiums payable for a limited term of
years
b. low cost protection only for a limited term of years with no savings
c. the highest level of savings for the insured within a specified term of years
d. protection with premiums payable for life and a low level of savings as an alternative to

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continued protection in old age.

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59. In life insurance, the term “sub-standard rates” is generally used to refer to

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a. premiums charged for policies with low amounts

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b. premiums charged to persons who are considered to be higher-than-average risk
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c. mortality rates that are lower than the rates suggested by the regulatory authorities
d. mortality rates that are lower than those expected by the company according to its mortality
table
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60. Life insurance companies make use of the laws of probability in order to
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a. estimate future death rates among members of a given group

b. predict when an individual insured will die
c. develop statistics of past deaths among the general population
d. determine the experienced death rate among insured persons
ed d
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-end of Set A-
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