INSURANCE COMMISSION

Reviewer for Insurance Agents’ Examination

LIFE EXAMINATION

DIRECTION: Choose the correct answer.

1. In a policy where an irrevocable beneficiary has been designated by the insured, without the
beneficiary’s permission, can

A. Avail of a non-forfeiture option

B. Discontinue premium payments
C. Borrow minimal cash loan
D. Alter the dividend option presently in effect

2. Indicate which of the following is not a function of an application for life insurance policy

a. To give details pertaining to non-forfeiture options

b. To furnish information on which contract of life insurance may be written
c. To furnish initial information as to insurability
d. To convey to the company the desire of the applicant to obtain insurance

3. Both endowment and term life insurance policies provide that

A. No cash value is available to the policy owner during the term of the policy
B. Renewal and conversion privileges are available
C. A benefit will be paid at the end of the period of coverage if the person insured is then
alive
D. Insurance protection will be limited to a specified period

4. 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 protect the son from Estate
Tax Liability?

a. Irrevocable primary beneficiary

b. Absolute assignee
c. Irrevocable secondary beneficiary
d. Revocable primary beneficiary

5. Which of the following is the least important reason for requiring that the insurance agents be
licensed?

a. To establish and maintain high professional and ethical standards

b. To protect the public
c. To give the government adequate control over the conduct of the agents
d. To provide additional income to the government through license fees
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 6. An insurance company generally has the right to rescind a life insurance policy if

A. Company discovers at any time that the policy owner 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 contestability period of the policy
D. Company discovers during the contestability period that the application contains a
material statement

7. In the event that a policy owner elects the paid-up insurance option

a. The premiums stop and the policy continues for the full face amount until age 65
b. The insurance continues at a reduced amount and with a reduced premium
c. The policy will automatically terminate
d. The premiums cease and protection continues with a reduced amount of coverage

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

A. Buys a new plan altogether

B. Presents satisfactory evidence of insurability
C. Momentarily assigns the policy to the company
D. Obtains written consent from his or her spouse

9. What are the basic settlement options?

A. Policy loan, guaranteed insurability

B. Cash surrender values, automatic premium loans
C. Fixed amount, fixed period, life income, interest on deposit
D. Double indemnity, total and permanent disability waiver

10. Paid-up additions:

A. Affect both cash and loan value of the policy

B. Don’t affect the cash value of the policy
C. Don’t affect the loan or cash value of the policy
D. Only affect the cash value of the policy

11. In most life insurance applications, the largest amount of information requested is data which

A. Identifies the applicant

B. Describes the type of insurance applied for
C. Relates to the insurability of the applicant
D. Describes the desired benefits and mode of payment

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 12. The total life coverage of a permanent basic policy can be greatly increased through the use of

A. An accidental death benefit rider

B. An interim term rider
C. A supplemental term rider
D. None of the above

13. A policy which permits the policyholder to vary the level of the premium or the sum insured,
and has its cash values dependent upon the investment performance and the level of premium
paid is known as _______ policy

a. Participating whole life policy

b. Participating endowment
c. Universal life
d. None of the above

14. Which of the following statements about “Disability Waiver of Premium Rider” is false?

a. Disability must occur before a stated date

b. The insured has to die while disabled
c. There is a waiting period
d. It has to be attached to a life insurance policy

15. A man applied for a P20,000 whole life policy and paid the full initial premium to the soliciting
agent. The agent issued a binding receipt. Under such a receipt, the insurance company,

a. Offers permanent insurance coverage effective as of the date of the application

b. Promises that the insurance coverage will become effective as of the date the
application is approved
c. Guarantees that policy will be issued as applied for
d. Immediately provides interim insurance that remains in effect until the policy is issued
or the application is declined.

16. In case of renewable term insurance, the policyowner may

a. Renew the coverage based on a higher premium

b. Change the life insured at renewal date
c. Renew providing the insurance company agrees to continue coverage
d. Renew at the same premium for further period of years

17. Life insurance companies make use of the laws of probability in order to

a. Estimate future death rates among members of a given group

b. Predict when an individual insured will die
c. Develop statistics of past death among the general population
d. Determine the experienced death rate among the insured persons

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 18. Endowment life insurance and term life insurance are similar in that both plans

a. Build up cash value rapidly in the early policy years

b. Provide for payment of the face amount if the insured is alive at the end of the
specified period
c. Provide life insurance protection for only the period of time specified in the policy
contract
d. Contain provisions for automatic continuation of the insurance protection at the end of
a specified period

19. An agent who determine a prospect’s complete financial requirements preparatory to offering
him a policy using the correct selling approach known as

a. Counselor selling
b. Total needs selling
c. Planned selling
d. Multiple products selling

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

a. The level of first year commission

b. Agent’s service oriented attitude
c. Pressure selling
d. The use of effective needs selling

21. All of the following are sources of information to an insurance company pertaining to the
insurability of an applicant except.

a. The applicant’s personal appearance

b. Medical examination report
c. Agent’s inspection report
d. Government tax records

22. Name the provision in a permanent life insurance policy under which premiums are
discontinued, full insurance will be maintained for a specified period:

a. Extended term insurance

b. Paid-up insurance additions
c. Life income option person
d. Reduced paid-up insurance

23. The extent of medical evidence required is determined by

a. The age of the applicant and the proposed sum to be insured

b. Occupation of the applicant
c. Financial condition of the applicant
d. Date of the last medical examination

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 24. Notwithstanding various possible legal impediments, if the owner of an endowment at age 65
policy tells you that the maturity of the policy he wants to provide his church with a monthly
donation for as long as the church exists. Which option do you recommend?

a. Fixed income option

b. Periodic annuity option
c. Interest option
d. Life annuity option

25. The settlement options provision may provide all of the following except:

a. Payment of the proceeds for the life of the insured

b. Payment of the proceeds over a fixed period
c. Payment of the proceeds in fixed amounts until exhausted
d. Proceeds held by the company, with interest payable to the beneficiary on request

26. If the applicant for life insurance fails to disclose or misrepresents a material fact, the contract is

a. Valid if the insurer issues a policy which is delivered to the applicant

b. Void from the beginning
c. Voidable by the insurer if it has been in force for less than 2 years
d. Valid unless the insurer can prove fraud

27. In certain situations a company may file interpleader actions with a Court of Law. This remedy is
used to

a. Determine if the cause of the insured’s death was an excluded risk

b. Decide conflicting claims on the same insurance proceeds
c. Resolve the question of insurable interest
d. Recommend the best settlement options for the beneficiary

28. Non-forfeiture provisions are included in a 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 to the policyowner that

a. No death claim will be denied for any misstatement on the application

b. Any guaranteed policy values will belong to the policyowner even if premium payments
are discounted
c. The face amount of the policy will remain the same even if the insured’s health
becomes impaired
d. The premium on the policy will remain the same even when another beneficiary is
added to the policy

29. Purchasing a continuous-premium, whole life policy rather than a limited payment, whole life
policy gives the policy owner the advantage of

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 a. Concentration of premium payments during the period of highest earnings
b. Liberal risk selection procedures
c. More insurance protection for the same annual premiums outlay
d. More rapid accumulation of cash values

30. Which of the following does not have a legitimate insurable interest?

a. An individual on the life of his mistress

b. An individual on his own life
c. An individual on the life of his spouse
d. A finance company on the life of its borrower

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

a. Renews a term life policy

b. Converts a term policy to a whole life policy
c. Chooses a mode of settlement for the life proceeds
d. Discontinues premium payments for a whole life or endowment policy

32. Which of the following statements regarding insurance premiums is false?

a. Cash is required for all premiums paid in the grace period

b. A premium is the legal consideration needed to effectuate a life insurance policy
c. The grace period is usually 31 days
d. Premiums which are paid quarterly or semi-annually are higher than those paid annually

33. If the interest on a policy loan is not paid at the policy anniversary the insurance company may

a. Demand full settlement of the loan

b. Terminate the contract
c. Refuse to grant future additional loans
d. Increase the present loan by the interest

34. The basic coverage provided by life insurance policies may be supplemented by separate
provision that provide coverage for additional amounts or of a different nature. Collectively,
these provisions are known as

a. Riders
b. Deposit privileges
c. Dividends
d. Assignment

35. Which of the following statement is false

a. The cash value of a whole life policy builds up at a slower rate than for a 20 year
endowment
b. The cash value in a permanent policy is guaranteed by the company

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 c. The cash value of an endowment builds up faster than that for a limited pay life policy of
the same duration
d. Because of its very short duration the cash value of a yearly renewable term policy
grows very fast

36. If the interest on a policy loan is not paid at the policy anniversary the insurance company may

a. Increase the present loan by the interest

b. Terminate the contract
c. Refuse to grant future additional loan
d. Demand full settlement of the loan

37. When you bought an insurance policy on your wife’s life, you were 27 and she was 26, but you
stated that you were 26 and she was 27. Five years later your wife died. The insurer will pay

a. Slightly less than the face amount

b. The face amount
c. The face amount adjusted for misstatement of age
d. The sum of the premium paid

38. The incontestability clause

a. Gives the company the right to rescind a policy at any time

b. Permits the company to pay claims within 2 years
c. Makes it necessary for the beneficiary to present proof of death in the event of a death
claim
d. Prevents the company from denying a claim after the policy has been in force for 2 years

39. The insured named a primary and secondary revocable beneficiary for P20,000 policy. Which of
the following is correct?

a. The designation of a contingent beneficiary is subject to the primary beneficiary’s

approval
b. The insured can add a third beneficiary at any time
c. Any policy loan or assignment will require the primary beneficiary’s signature
d. Upon the insured’s death the primary and secondary beneficiaries shall each receive
P10,000.

40. A yearly renewable term life insurance policy generally specifies that

a. The policyowner may renew the policy only once

b. Premiums shall increase every time the policy is renewed
c. Evidence of insurability shall be required every renewal
d. Cash values will increase for as long as the policy is in force

DIRECTION: Under Column A of your answer sheet, write T if the statement is TRUE and F if the
statement is FALSE.

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 41. In the case of misstatement of age, the amount of insurance is adjusted to the amount which
the premium paid at the correct age would have purchased.

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

43. A policy is not rendered void by reason of misstatement of age of the assured’s death.

44. In a group insurance, it is assumed that every member of the group is insurable, provided that
every member of the group is working a minimum number of (usually 50) each week.

45. A policy is still in force for the full face amount and will remain in force for a further period of
four years and 118 days without the payment of any premiums if has availed of paid-up
insurance option.

46. In most life insurance application, the largest amount of information requested is data which
identifies the applicant.

47. A policy that provides guaranteed cash value plus extra annual distributions and pays the
insured after a specified time is known as participating endowment.

48. An endowment at age 65 policy with premium payable for a limited period of 20 years pays the
full amount after 20 years.

49. Anti-selection occurs when persons in poor health wish to buy insurance.

50. According to the law of large numbers, events which happen seemingly by chance will actually
be found to follow a predictable pattern if enough such happenings are observed.

LIFE EXAM
ANSWER KEY

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 Final Exam
1 B 26 C
2 D 27 B
3 D 28 B
4 B 29 C
5 D 30 A
6 D 31 D
7 D 32 A
8 B 33 D
9 C 34 A
10 D 35 D
11 C 36 A
12 C 37 C
13 C 38 D
14 B 39 B
15 D 40 B
16 A 41 T
17 A 42 F
18 C 43 T
19 B 44 F
20 C 45 T
21 D 46 F
22 A 47 T
23 A 48 T
24 D 49 T
25 A 50 T