Name: _______________________________________________ Date _________________

INSTRUCTION : Encircle the best answer.

Module 1 - Principles of Life Insurance

1. The fundamental advantage of the use of life insurance as a means of meeting economic losses
is that through life insurance these losses are

a. reduced for the group as a whole through the multiplier effect

b. deferred for a specified period of time
c. met as they arise through savings accumulated on an assessment basis
d. spread over a large number of people

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

a. total value of the individual’s tax contribution to the national economy

b. total value of his physical assets
c. the amount of capital required to replace family income needs
d. total value of the assets and any future earnings derived therefrom

3. The consideration required by the life insurance company to make the insurance coverage
effective is the

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

4. Life insurance companies make use of the law 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 deaths among the general population
d. determine the experienced death rate among insured persons
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5. Some insurance companies charge females a lower premium rate than males. Which of the
following justifies the practice?

a. Women are less likely to lapse their policies

b. Generally, women have less hazardous jobs
c. Women have a longer life expectancy (after age 54) than men
d. Generally, women buy the higher premium rate policies, such as an Endowment policy or
Retirement Income policy

6. 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

7. Life insurance guarantees cash benefits for all the following except
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 a. clean-up fund
b. family dependency period income
c. educational fund
d. mortgage

8. The level premium system means the

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
d. mortality rate remains the same each year

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

a. probability
b. insurable interest
c. mortality table
d. risk sharing

10. For a given policy, the total of 12 monthly premiums is greater than the annual premium. Which of
the following statements is not a reason for this?

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

b. the company considers the amount that will never be collected if the insured dies before
paying monthly premiums for a full year
c. the lapse rate on cash monthly business is expected to be higher as there are more
opportunities to default
d. premiums are calculated on an annual basis

11. Life insurance is

a. only available to a specific group

b. a speculative risk
c. a cooperative risk-sharing plan
d. paid-up insurance (reduced insurance)

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

a. retirement years
b. years between the time the youngest child is 15 years old and the mother is 62 years old
c. years immediately following the insured’s death
d. period during which the children are small and cannot provide for themselves

13. Life insurance contributes directly to the welfare and progress of the country by

a. partially relieving the community of the care of dependents

b. encouraging provision for the future
c. accumulating capital for investment in commerce and industry
d. all of the above

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 Module 2 - Types of Policies

1. All of the following are correct statements except

a. premiums of whole life insurance are less than for endowment policies
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 purposes
d. there is a higher risk element for the insurance company involved in connection
with endowment policies than with whole life policies

2. The guaranteed cash value is

a. the amount that the company will pay if the policy is surrendered
b. the amount which can be borrowed at any one time
c. the paid-up value of the policy
d. the face amount

3. 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
continued protection in old age

4. Group life insurance covers

a. death provided it is during working hours and in the place of employment
b. death of the employee regardless of cause except suicide during the first year
(sometimes two years)
c. accidental death only
d. only death by heart attack, pneumonia or cancer

5. 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. endowment policy
b. term policy
c. whole life policy
d. a life paid up at 65 policy

6. 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 the endowment period, or pays the
face amount to the named beneficiary if the insured dies before the end of the
endowment period
c. it is actually a combination of endowment insurance and term insurance
d. none of the above

7. A whole 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

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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.

8. Limited pay life policies are called such because those policies
a. shorten the period when the benefits may be paid
b. limit the period during which the premiums are payable
c. limit the condition under which the policies are payable
d. limit the number of beneficiaries thereby minimizing the problems of paying too many
people

9. Under an endowment policy, if the person whose life is insured survives to the end of the period
stated in the policy, the
a. policy will terminate without value
b. face amount of the policy will be paid
c. policy will automatically be converted to paid-up whole life policy
d. the extended term insurance option will go into effect

10. 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 20 pay life policy
b. a whole life policy
c. a term policy
d. endowment policy

11. In theory, endowment insurance is a combination of

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

12. A prospect tells you that he is most interested in having a life insurance coverage with a high
level of savings by age 65. Would you offer him
a. a whole life policy
b. an endowment policy
c. a term policy
d. a 20 pay life policy

13. A yearly renewable term life insurance policy generally specifies that
a. the policyowner may renew the policy only once
b. evidence of insurability shall be required every renewal
c. premiums shall increase every time the policy is renewed
d. cash values will increase for as long as the policy is inforce

14. A term policy provides

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

15. 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 term policy
b. a 20 pay life policy
c. an endowment policy
d. a life paid-up at age 65 policy

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16. 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 alive at that date. This policy is obviously a
a. 20 pay life
b. 20 year endowment
c. 20 year term
d. None of the above

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 wants this coverage at the lowest possible
cost. Would you offer him
a. a 20 pay life policy
b. a term policy
c. an endowment policy
d. a life paid-up at age 65 policy

18. Mr. Barrio has been insured under the employee group life insurance plan for several years. If he
leaves his job, Mr. Barrio’s group life insurance will
a. terminate as of the date he leaves
b. be changed, upon the employer’s notice to the insurance company, to a permanent plan
of insurance for the same amount
c. continue to provide coverage for 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
policy year

19. At the end of 25 years, which statement is true for a 25-pay life policy and is not for a 25-year
endowment

a. no further premiums are paid

b. the contract is terminated
c. the sum assured is paid
d. the insurance remains inforce

20. Which of the following describes the convertible feature of a term insurance policy?

a. it may be changed to another term insurance policy without evidence of insurability

b. it may be changed for a guaranteed sum
c. it may be changed to another whole life policy
d. it may be changed to a permanent insurance without evidence of insurability

21. A policy which affords coverage for two or more persons simultaneously with the face amount of
the policy payable when any of the insured dies at which time the policy terminates automatically
is known as a

a. Joint and Survivor Annuity

b. Double Duty Peso Insurance
c. Joint Life Policy
d. Split Peso Insurance Plan

22. In personal accident and/or sickness contracts, “blanket policies” refer to

a. group insurance covering loss from specific hazards, incidental to or related to particular
activities
b. insurance covering all hazards
c. insurance for all types of hospital and health care expenses
d. none of the above

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23. All of the following statements about Group Insurance are true except

a. Each covered employee receives a policy

b. A covered employee who terminates his employment continues to be covered for 31 days
after termination date
c. In a non-contributory plan, 100% of the group members must be included
d. Most group policies pay dividends to employer

24. In group insurance it is assumed that every member of the group is insurable provided that

a. every member of the group can pass a 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

25. The “Convertible” feature of a term insurance policy provides that the policy may be

a. cashed for a guaranteed sum

b. changed to a permanent insurance policy without evidence of insurability
c. changed to another life
d. changed to permanent insurance policy with evidence of insurability

26. The basic purposes of a conditional premium receipt are to acknowledge payment of the initial
premium for life insurance and to

a. guarantee that a policy will be issued as applied for

b. provide insurance coverage earlier than the policy delivery date if certain
requirements are met
c. eliminate the need for acceptance of the offer in forming the contract
d. back date the policy to save age

27. 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

b. a limited pay life policy
c. an unlimited payment policy
d. an ordinary life policy

28. A prospect tells you that he wants the highest coverage possible for the least annual cash outlay.
Would you offer him

a. a whole life policy

b. an endowment policy
c. a term policy
d. a 20 pay life policy

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

a. yearly renewable term

b. six months interim term

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 c. ten year term
d. decreasing term

30. All of the following policies can be used to afford retirement income except

a. endowment at age 60
b. whole life
c. limited payment life
d. term to age 65

31. The premium on 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

32. Participating life insurance policies are policies which

a. allow variation in the wording of certain provisions

b. provide 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

34. The savings element of permanent plans allow for the build up of

a. dividends
b. cash value
c. maturity benefits
d. death benefits

35. 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
b. policy reserve
c. accrued discount
d. contingency fund

36. A living benefit in an insurance policy is

a. the guaranteed insurability benefit

b. the right to change beneficiaries
c. the waiver of premium for disability
d. the cash surrender value

37. The full face amount is received by the insured person 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 an 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 a limited pay life

38. Which of the following statements is false?

a. The cash value in a permanent policy is guaranteed by the company

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

Module 3 - Supplementary Contracts (Riders)

1. For Waiver of Premium to be effective

a. disability must be total
b. disability must be permanent
c. both a & b
d. either a or b

2. The basic coverage provided by life insurance policies may be supplemented by several
provisions that provide coverage for additional amounts or of a different nature. Collectively,
these provisions are known as
a. riders
b. dividends
c. assignment
d. deposit privileges

3. One supplementary benefit offered is a payor’s benefit which is intended to

a. provide a waiver of premium benefit in the event of death or disability of the
person paying the premiums
b. provide for the return of premiums to an adult payor in the event that a minor insured dies
c. assure that the adult payor will retain a vested interest in the policy when the insured
reaches the age of majority
d. allow the insurance company to pay the policy’s proceeds to the person who seems
equitably entitled to the proceeds

4. The total life coverage of a permanent basic policy can be greatly increased through the use of
a. an accidental death benefit rider
b. a cancer rider
c. an interim term rider
d. a supplemental term rider

5. Mr. Alvarez bought a P150,000 policy with a 20-year reducing term rider. He died 5 years after
the policy issue date. After his death, his wife received P150,000 and a monthly income
thereafter for 15 years. This policy definitely has a
a. Family Maintenance Policy
b. Family Income Rider
c. Straight Family Policy
d. Combination of Whole Life and Level Term Insurance

6. In order for life insurance premiums to be waived under a typical waiver of premium for a
disability 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 of a chronic nature
7. Disability benefits are not paid

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 a. for self-inflicted injuries
b. if there is a loan against the policy
c. if all policy dividends have been withdrawn
d. if disability resulted from sickness only

8. 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

9. A person wanting a greater coverage for the least amount of premium has an option of attaching
what rider in his permanent life policy?

a. waiver of premium
b. term insurance rider
c. guaranteed insurability rider
d. accidental death rider

10. Which of the following statements about Disability Waiver of Premium Rider is incorrect?

a. There is a “waiting period”

b. Disability must occur before a stated age
c. The insured has to die while disabled
d. It has to be attached to a life insurance policy

11. If premiums are being waived under a waiver of premium benefit and the insured dies, the
proceeds will be the
a. reduced paid-up face amount
b. face amount less unpaid premiums
c. cash surrender value
d. face amount

12. If an insured is disabled and his life insurance is being continued in force through the waiver of
premium benefit, the dividends on the policy would

a. continue at a reduced rate

b. cease
c. continue as if the insured were paying the premium
d. continue, but they would be applied toward the premium that is being waived

13. 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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 Module 4 - Underwriting

1. Antiselection refers to a general tendency on the part of

a. applicants for life insurance to opt for inexpensive plans of insurance
b. persons with impaired insurability to be more keen in obtaining insurance
coverages than those persons who are in good health
c. agents to call only those prospects who state no objection to life insurance
d. agency managers to discriminate between loyal agents and disloyal agents

2. Substandard premium rates are charged

a. policies which carry a lower than usual interest rate
b. applicants who are better than average risks
c. applicants who desire low premiums
d. applicants who carry a higher health or occupational risk

3. 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

4. A company can restrict its liability if death occurs as a result of an aviation accident. The aviation
exclusion clause usually applies to which of the following?
a. anybody in an aircraft flight
b. only for pilots
c. anybody aboard an aircraft in flight who has duties aboard the aircraft
d. anybody in the aviation industry who works on, around or in the aircraft

5. In life insurance, the term “substandard rates” generally is used to refer to

a. premiums charged for policies with low amounts
b. premiums charged to persons who are considered to be higher-than-average risk
categories
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

6. The company will allow a policy change from a higher to a lower premium plan, provided the
insured
a. obtains written consent from his or her spouse
b. buys a new plan altogether
c. presents satisfactory evidence of insurability
d. momentarily assigns the policy to the company

7. In a life insurance company, risk appraisal is necessary to

a. prevent any antiselection
b. project dividend rates for participating policies
c. collate mortality statistics
d. calculate the mortality rate for a given policy

8. The information on a life insurance application relating to an applicant’s birthday, occupation and
avocation is used by the company primarily for the purpose of
a. appraising the risk
b. assigning the risk
c. determining the insurable interest
d. determining a suitable plan of insurance

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9. A housewife without gainful employment applies for a P500,000 life coverage. Which of the
following should the agent do?
a. suggest she doubles the amount
b. tell her she has no need for it
c. be grateful
d. examine the adequacy of the husband’s insurance coverage

10. A risk is considered substandard based on any or all of the following criteria
a. death, income and educational attainment
b. death, occupation and moral character
c. occupation, character and family health history
d. income, educational attainment and occupation

11. All of the following are sources of underwriting information except

a. medical examination report
b. agent’s confidential report
c. government tax records
d. applicant’s personal appearance

12. Applicants for life insurance with moderate physical impairments are called sub-standard risk 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 values
d. are required to pay premiums on an annual basis

13. 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

14. A hazardous occupation could be defined as

a. an occupation the duties of which expose the insured to a degree of sustaining injury
b. an occupation in unhealthy working conditions exposing the insured to elements which
can cause sickness
c. an occupation which exposes the insured to social hazards
d. all of the above

15. An agent fills out the Agent’s Confidential Report. What information must he put in his report?
a. information about insured’s standing in the community
b. information about insured’s finances
c. all information he knows which are material to the application for insurance
d. a & b only

16. Mr. Jesus Gonzales, 61 years of age, carried a P500,000 Whole Life policy for 25 years, never
borrowed from it, but forgot to pay premiums before leaving for a four-month vacation to the USA.
On his return trip, he was killed in a plane crash. As his estate executor, you saw the lapse
notice received from the insurance company for this Whole Life policy. What action should you
take?
a. None, since the policy has lapsed for non-payment of premium and benefits are
not paid.
b. Investigate to see if the insured elected the Premium Loan as non-forfeiture option
c. Apply for the face amount if the policy is to be paid to the beneficiary since coverage
would have been afforded under the Extended Term Insurance non-forfeiture option
d. Apply for the cash value of the policy under the non-forfeiture option

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17. When the death benefit of a policy is restricted in amount during the early years of the policy this
restriction is known as
a. rate adjustment
b. an increasing death benefit
c. a lien
d. a subtractive clause

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

a. project dividend rates for participating policies
b. prevent any antiselection
c. collate mortality statistics
d. calculate the mortality rate for a given policy

19. All of the following are sources of information to an insurance company pertaining to the
insurability of an applicant except
a. the medical examination report
b. the medical information bureau
c. the agent’s confidential report
d. government tax records

20. If a policyholder changes his occupation without notifying the company, might it affect the benefits
under his policy?

a. No, benefits and premiums may only be changed at the renewal date of the policy
b. Yes, unless the policy specified otherwise, if he engaged in a more hazardous
occupation, his benefits may be prorated
c. No, benefits agreed upon at the inception of the policy may not be changed
d. None of the above

22. Insurable interest is necessary when a person insures another

a. so that the person being insured may be properly appraised
b. to establish that there is a genuine risk
c. because interest on premiums must be earned
d. to make sure that he will pay the premiums

Module 5 - Policy Provisions

1. In a child insurance policy, the Parent Waiver Clause provides that

a. if the father dies, the policy becomes reduced or paid-up
b. the premiums are waived if the father is disabled or dies
c. if the child becomes disabled, no further premiums are required
d. all premiums are refunded when the father reaches age 60

2. All of the following statements regarding “Absolute Assignment” are true, except
a. it is the transfer of the legal right or interest in a policy to another party
b. The policyholder may discontinue premium payments
c. The insurer must agree to an absolute assignment
d. An irrevocable beneficiary must agree to an absolute assignment

3. If the interest on a policy loan is not paid at the policy anniversary, the insurance company may
a. terminate the contract
b. demand full settlement of the loan
c. refuse to grant future additional loans

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 d. increase the present loan by the interest

4. 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 this policy existed. Which of the following classifications did your
client fall under?
a. collateral assignee
b. absolute assignee
c. revocable primary beneficiary
d. irrevocable primary beneficiary

5. Life insurance policy loans are limited to an amount which with interest will not exceed the
a. cash value of the policy
b. total premiums paid
c. net amount of risk
d. present value of future premiums

6. In the Philippines, an insurance company’s right to rescind a life insurance contract is generally
limited to the first 2 years following policy issue date or date of approval of last reinstatement.
The provision is embodied in
a. incontestability clause
b. lifetime clause
c. omnibus clause
d. no-exclusion clause

7. All of the following are true except

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

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

9. 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

10. 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?
a. collateral assignee
b. irrevocable primary beneficiary
c. revocable primary beneficiary
d. absolute assignee

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11. A businessman has arranged for a development loan which will be available 1 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 best
economic arrangement that you can recommend?
a. decreasing term
b. interim term
c. extended term
d. yearly renewable term

12. 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. accumulated dividends
b. extended term insurance
c. loan value
d. paid-up addition

13. Which of the following is not correct with respect to reinstatement process?
a. assumption or repayment of any indebtedness
b. written assurance of intent to keep the policy inforce
c. payment of back premiums with interest
d. an application for reinstatement

14. 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 birth plus interest
d. face amount of the policy minus the unpaid premium

15. An applicant wants a participating policy where the death benefit will be maximized. Which of the
following should he choose?
a. paid-up additions
b. accumulated dividend
c. extended term
d. paid-up insurance (reduced insurance)

16. 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
b. periodic annuity option
c. interest option
d. none of the above

17. Which statement is false when the new owner borrows on a policy?
a. if a large loan is taken after the policy has been in force for some years, the interest cost
may exceed the premium
b. dividend will be reduced by the amount of the current interest
c. the policy will lapse if, after reasonable notice the indebtedness exceeds the cash
value
d. the proceeds of the policy will be reduced by the amount of unpaid loan plus interest, if
the insured dies

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18. A policyholder with a whole life policy has reached the age of 65 and he does not want to go on
paying premiums but he does want to remain insured for life. Which of the following would he
take?
a. extended term insurance
b. accumulated dividend
c. paid-up additions
d. paid-up insurance (reduced amount)

19. The following statements concerning insurable interest are correct, except
a. it is deemed to exist if economic loss would occur at the death of the insured
b. it is deemed to exist by virtue of a relationship by blood or by marriage
c. it is important for purposes of underwriting the risk
d. everyone has an insurable interest in his own life

20. Which of the following is a settlement option?

a. cash surrender value
b. extended term insurance option
c. policy loan
d. interest on insurance proceeds

21. Generally, a reinstatement application will be accepted from the owner of a lapsed insurance
policy
a. any time during the lifetime of the insured
b. within a period of three to five years after the date of lapse as specified in the
policy
c. any time within the extended term insurance period regardless of its length
d. only on a premium due date or during the grace period of an unpaid premium

22. In a case where the premium has not been paid and the cash value has been exhausted, the
policy can still avail of
a. automatic premium loan provision
b. reinstatement provision
c. extended term insurance
d. grace period

23. 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

24. You visit a prospect who tells you that he does not believe in life insurance because when his
mother died, he was a 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
b. irrevocable primary beneficiary
c. revocable secondary beneficiary
d. revocable primary beneficiary

25. All of the following apply under the beneficiary provision, except
a. an irrevocable beneficiary’s interest is very similar to that of an absolute assignee
b. the beneficiary must notify the company of the insured’s death within 24 hours
c. the beneficiary can only receive the policy proceeds if he is alive at the time of the
insured’s death

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 d. the interest of a contingent beneficiary remains inoperative during the lifetime of the
insured

26. Which of the following statements best describes the Automatic Premium Loan Provision?
a. a provision whereby the company automatically pays the premium out of the loan
value and charges it as a loan to the insured, if said premium due is not paid within
the grace period
b. a provision whereby one life insurance company will guarantee payment of the premium
to another life insurance company
c. a provision whereby a loan up to the amount of the annual premium is automatic
d. a provision whereby the company lends the insured the amount of a premium to assure
that the non-forfeiture options will be paid

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

a. need not be paid during the insured’s lifetime, but interest charges will accumulate
on the outstanding loan balance
b. need not be paid during the insured’s lifetime, and no interest will be charged if partial
repayment 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

28. 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 a company from denying a claim after the policy has been in force for
2 years

29. The settlement options provisions 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

30. 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

31. Amy is designated as the revocable beneficiary of an insurance policy on her husband Romy’s
life. While Romy is alive, Amy
a. has a mere expectancy with 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 Romy’s exercise of ownership rights

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

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 c. a revocable beneficiary
d. the irrevocable beneficiary

33. The owner of a life insurance policy is permitted to designate both a primary beneficiary 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 insured’s death
b. dies before receiving all the installments due under a settlement option
c. is a minor at the time of the insured’s death
d. dies before the person whose life is insured

34. 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

35. Mr. Lorenzo and his primary beneficiary die in a common accident. It is established that the
primary beneficiary died ahead of Mr. Lorenzo and there are no contingent beneficiaries named.
The proceeds of Mr. Lorenzo’s life insurance policy will be paid to
a. the estate of the primary beneficiary
b. the estate of the insured
c. both the estates of the insured and the primary beneficiary on a 50/50 percent basis
d. a court of law

36. Which of the following are requirements in reinstating a policy after it has lapsed for non-payment
of premiums?
a. payment of all overdue premiums
b. application for reinstatement within the specified time
c. evidence of insurability and payment of interest on overdue premiums
d. all of the above

37. An insured misstated his age by 3 years in the application indicating that he was younger than his
actual age. If he dies 10 months later, the insurance company will
a. pay the full face amount
b. not pay any of the benefits
c. refund the premium paid plus interest
d. pay the benefits that the premium would have purchased at the correct age

38. The grace period provision in life insurance policies is designed to

a. compel the insured to pay premiums more promptly

b. permit the company to extract extra charges
c. give the insured more time to pay the premium while coverage remains in force
d. terminate the contract of insurance automatically

39. In most cases, a policy loan which has not been repaid at the time of the insured’s death will be
a. charged to the person responsible for paying the debts of the insured
b. collection from the life insurance company’s reserve
c. written off against the insurance company under the terms of the premium loan
repayment option
d. deducted from the proceeds of the policy when the death claim is paid

40. A client tells you that his bank wants him to use his life insurance policy so that his bank loan will
be paid off if he dies. You recommend that he
a. appoint an irrevocable beneficiary

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 b. make an absolute assignment
c. make a collateral assignment
d. none of the above

41. 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. irrevocable primary beneficiary
b. irrevocable secondary beneficiary
c. revocable secondary beneficiary
d. collateral assignee

42. A policy that is in force for less than the original sum assured with no indebtedness has availed of
a. paid-up insurance option
b. cancellation
c. grace period
d. the reinstatement provision

43. Non-forfeiture provisions 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 insured’s 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 discontinued
d. no death claim will be denied for any misstatement on the application

44. Life insurance policy loans are limited to an amount which will not exceed the
a. cash value of the policy
b. total premium paid
c. net amount at risk
d. present value of future premiums

45. If the interest on a policy loan is not paid at the end of the year, the insurance company may
a. void the contract
b. add the interest to the outstanding loan
c. refuse additional loans
d. all of the above

46. A policyholder tells you that if he dies before his son reaches the age of majority he wants the Life
Insurance Company to hold the sum insured until the son reached the age of majority. Which of
the following would you recommend?
a. interest option
b. fixed income option
c. fixed period option
d. none of these

47. 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 insurance
company will pay
a. the face amount
b. the face amount adjusted for misstatement of age
c. the sum of the premiums paid
d. slightly less than the face amount

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48. The grace period provision in life insurance policies is designed to
a. compel the insured to pay the premiums more promptly
b. permit the company to exact extra charges
c. permit the company to cancel the policy
d. give the insured more time in which to pay the premium during which
period the insurance continues in effect

49. If the policyholder wants to get the maximum immediate value from his non-participating policy by
surrendering it, which of the following would he get?
a. cash value
b. loan value
c. extended term insurance
d. accumulated dividend

50. An automatic premium loan differs from other policy loans in that an APL
a. must be repaid during the policy year in which it is granted
b. need not be repaid by the policyowner
c. involves higher interest payments because of the greater cost of administration
d. goes into effect requiring no separate action from the policyowner

51. Instead of taking a lump sum settlement under a policy, the insured or the beneficiary usually can
elect to take a
a. reinstated policy
b. settlement option
c. government bond
d. new single premium life insurance policy

52. When a policyholder has to pay his premium and interest which of the following has, he availed
of?
a. cash value
b. loan value
c. extended term insurance
d. accumulated dividend

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

a. The grace period is usually 30 days
b. Cash is required for all premiums paid during the grace period
c. A premium is the legal consideration needed to effect a life insurance policy
d. Premiums which are paid quarterly or semi-annually are higher than those paid annually

54. All of the following statements regarding a life insurance application are correct except
a. misstatement of material facts could void the policy during the contestable period
b. it must be signed by the applicant
c. usually it will be made a part of the policy
d. statements made on the application are warranties

Module 6 - Legal Aspects

1. The life insurance industry is under government provision because

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 a. it is a charitable institution
b. it pays such high taxes
c. it is required to account for money spent in company operations
d. it affects public trust

2. The term “Quality Business” refers to those policies which

a. do not require a medical examination

b. are solicited by an agent during his first call on a prospect
c. are persistent and demonstrate good mortality experience
d. carry a hefty rate of premium per thousand of insurance

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

a. to provide additional income to the government through license fees

b. to protect the public
c. to establish and maintain high professional and ethical standards
d. to give the government adequate control over the conduct of agents

4. Which of the following is false?

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

5. If a policyholder changes his occupation without notifying the company, might it affect the benefits
under his policy?

a. No, benefits and premiums may only be changed at the renewal date of the policy
b. Yes, unless the policy specified otherwise, if he engaged in a more hazardous
occupation, his benefits may be prorated.
c. No, benefits agreed upon at the inception of the policy may not be changed.
d. None of the above

6. Which of the following statements is false?

a. When a policy lapses, the company is unable to maximize its objective which is the
formation of a long term capital for national development
b. The company losses income from lapsed policies and therefore, it does not sufficiently
cover the selling costs.
c. When a policy lapses, the company neither gains nor losses since it ceases to carry the
risk of covering the insured
d. The company with low persistency rate is unable to maintain competitive premium rates
e. None of the above

7. The Insurance Commissioner has the power to revoke or refuse to renew an agent’s license in all
of the following instances except:

a. when the agent diverts any premium collection for his personal use
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

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 c. when the agent makes any material misstatement in his application for license
d. none of the above

8. In practice, most claims for the death benefit of the 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 claim forms are received by the
company

9. Which of the following statements is false?

a. too many lapsed policies can cause an agent’s agreement to be cancelled

b. when a policy lapses, the agent losses a valuable source of prospects
c. when a policy lapses, the agent losses all future commissions on renewal premiums
d. agents with persistent business seldom stay long with one company

10. An agent who determines a prospects complete financial requirement preparatory to offering him
a policy using the correct selling approach known as
a. Planned selling
b. Counselor selling
c. Total need selling
d. Multiple products selling

11. In most companies, the agent’s role in marketing group life insurance is limited to
a. losses due to lapses are negated by savings in the agent’s commission
b. securing the necessary appointment for the home office group marketing people
c. preparing the group sales proposal
d. repeat business is persistent business

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

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

13. Which of the following statements is incorrect?

a. funds may have to be frozen for a considerable period of time where minor irrevocable
beneficiaries are involved
b. it is a good practice to encourage an insured to appoint his minor child as an
irrevocable beneficiary
c. in those cases where a minor beneficiary is appointed, there should also be an appointed
a Trustee for the period of the child’s minority
d. the appointment of minor irrevocable beneficiaries often creates major problems

14. Insurable interest must exist

a. at the inception of the policy

b. throughout the premium paying period

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 c. until the maturity date of the policy
d. for as long as the insurance policy remains inforce

15. Non-productive agents in a company affect

a. investment yield
b. risk sharing
c. expense
d. profit allowance

16. 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
the 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

17. 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

18. Which of the following statements is correct?

a. orphan policyowners hardly need an agent’s services
b. orphan policyowners will only deal with their original agents
c. new agents should stay away from orphan policyowners
d. orphan policyowners are good sources of prospects and new sales

19. The only instance when a life insurance contract is treated primarily as an indemnity agreement is
when a
a. a person insures the life of a friend
b. creditor insures the life of his debtor to protect himself
c. person insures the life of his or her spouse to protect against the loss of income earned
by the spouse
d. person in a partnership insures the life of his partner to protect the firm against loss due
to the death of that partner

20. The IC has the power to adjudicate insurance claims against insurance companies for any single
claim not exceeding:
a. P 1,000,000
b. P 250,000
c. P 100,000
d. P 500,000

21. The legal consideration for the promise made by the insurance company in a life insurance
contract is the

a. payment of renewal premium

b. approval by the underwriters
c. establishment of the reserve
d. payment of the initial premium

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22. 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

23. Most life insurance agents are expressly authorized to perform the following functions:

a. solicit applications for insurance, accept the initial premium and issue a receipt on
behalf of the insurance company
b. solicit and approve the applications of the proposed insured
c. accept initial premium and waive the insurable interest requirement
d. appraise applicants and decide on a standard or sub-standard rating

24. 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 the participating policies
d. prepare routine proposals for life insurance coverage

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

a. stock company
b. foreign company
c. domestic company
d. mutual company

26. An agent is prohibited from doing all of the following practices except to

a. alter an application without the applicant’s prior written approval

b. convince a prospect to cancel his policy in one insurance company to buy a policy from
the insurance company represented by the agent
c. refund some of his commission to his client
d. make complete comparison of the policies he sells and those offered by competing
insurance companies

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

a. quality of agent’s prospecting habits

b. the level of first year commission
c. the use of effective needs selling
d. agent’s service-oriented attitude

28. For life insurance coverage to be valid, insurable interest must exist

a. only at the time of the loan

b. only at the inception of the policy
c. both at the time of the policy issue and at the time of the loan but not necessarily
throughout the lifetime of the policy
d. throughout the lifetime of the policy

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29. For anyone to have the benefit of compensation on the value of the life of someone else, there
must be an established

a. pure risk
b. probability
c. risk sharing
d. insurable interest

32. 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 describe the classification of
the children?

a. revocable secondary beneficiary

b. irrevocable secondary beneficiary
c. revocable primary beneficiary
d. irrevocable primary beneficiary

33. 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, as she believes that he is dead. Which of the following
statements is correct in this case?

a. It would be four years before the court could declare him legally dead
b. It would be seven years before the court could declare him legally dead
c. The company would pay immediately
d. It would require 6 months before the court could declare him dead.

Module 7 - Annuities

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

a. periodic annuity option

b. life annuity option
c. fixed period option
d. fixed income option

2. A prospect tells you that he wants the maximum possible provision for his retirement with no life
coverage. Would you offer him

a. whole life policy

b. a life paid-up at age 65 policy
c. a 20 pay life policy
d. none of the above

3. 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 predetermined date

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4. A man is about to retire. He has P100,000 which he wishes to use to provide income for himself
as long as he lives and which would continue to his wife as long as she lives after his death. You
would sell him a

a. retirement income endowment

b. straight life annuity
c. cash refund policy
d. joint annuity

5. An “Immediate Annuity” is
a. something that makes an actuary see a doctor for special treatment
b. a single premium whole life policy
c. an arrangement where a person can pay a life insurance company a sum of money in
return of a pension for life.
d. A special regular annual savings arrangement to provide a pension for life with no
life coverage.
e. A one-time payment for a pension to start at a predetermined date.

6. An annuity plan :
a. Offers life insurance protection
b. Offers the waiver of premium benefits
c. Is the same as an endowment plan
d. Is a purchase of income

7. The person who purchase the annuity is called the :

a. Assignor
b. Owner
c. Insured
d. Annuitant

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