1. Which of the following is true about universal life insurance? It offers flexible payments.

2. An endorsement or rider on an insurance policy? Is a statement added to the policy.

An insurance policy may be altered by adding an endorsement or rider. An example is adding
coverage of specified benefits such as accidental death benefit.
3. The ways in which the proceeds of a life insurance policy can be paid to a beneficiary include
all of the following, except: Dividend payments.
Dividends are paid during the lifetime of the insured. They are not the proceeds of the insurance
policy. They may be taken in cash, used to pay the next premium, used to buy more insurance,
or left on deposit to earn interest.
4. An automatic premium loan: Extends the length of time the insurance policy is valid.
An automatic premium loan is when the insurer uses the cash value to pay the premiums rather
than let the policy lapse.
5. Which of the following is characteristic of credit life insurance? Lenders seek to cover
possible payment losses from the death of a debtor.
Credit life insurance covers a lender in the event the borrower dies before a loan is paid off.
6. A fundamental difference between whole life and term life insurance is that: Whole life
insurance has policy reserves but term life insurance does not.
Early payments in a whole life insurance exceed the pure cost of insurance, which creates a
reserve known as the cash surrender value.
7. The guaranteed insurability rider allows the policyholder to: Purchase additional life
insurance.
8. All of the following represent uses of cash reserves, except:Endowment loan.
9. When an irrevocable beneficiary is named:The cash surrender value cannot be assigned to
someone else without the consent of the irrevocable beneficiary.
When an irrevocable beneficiary is named, the policyholder cannot assign the cash surrender
value of the policy to a third party without the consent of the irrevocable beneficiary.
10. Which of the following is true of universal life insurance?It does not clearly state the rate of
interest that is credited on the policy reserves.
11. People are often puzzled when they decide to buy life insurance because: Different
companies often use different names for the same policies.
12. The cost of insuring a life for one year based on the mortality rate for persons of the same
age and gender is called:The pure cost of life insurance.
The cost of insuring a life for one year is called the pure cost of insurance.
13. A limited payment policy is a variation of:A whole life policy.

14. If you have a mortgage and wish to leave a debt-free home to your dependants, you would
probably buy:A decreasing term policy.
Decreasing term insurance is often used as mortgage insurance.
15. Which of the following is often added as a rider to a life insurance policy? All of the above.
Riders can cover such items as guaranteed renewability, waiver of premium, guaranteed
insurability, conversion privilege, and accidental death benefit.
16. Ravi and Jasmine have three young children. When considering how much life insurance
they will need, the general rule is that:As children get older, less money would be required
to support them until they become independent.
Each year, the money that will be needed to support children until they become independent
will decrease.
17. A common reason for purchasing life insurance is:To provide cash for an estate at time of
death.
Often most of the assets are tied up in property, but insurance provides liquidity to the survivors
in terms of a cash payment.
18. The face amount of a policy is:The amount that will be paid to the beneficiary.
The amount that the beneficiary will receive.

19. Jennifer has become a single parent with four children to support. When naming the
beneficiary to her life insurance, she can:Allot each child 25% of the face value.

20. Actuaries use mortality tables to:Predict the number of people in a specific age group that
will die in a year.
Mortality tables are used to predict the number of people of any given age who will die within
the year.
21. For the insured, the level premium means that:The premium will always remain the same
amount.
The policyholder pays the same amount regularly for the duration of the policy.
22. For the insurer, the level premium means that:The premium overpays the pure cost of
insurance in the early years, and underpays it in the later years.
In the early years, the premium is higher than the pure cost of insurance, in the later years it is
lower.
23. The major difference between life and property insurance is that life insurance:Always pays
the full amount, and the claim always occurs.
24. Jamal is a firefighter who also smokes cigarettes, two factors increase his risk of dying, so if
he wanted to get life insurance:He would probably be classified as high-risk and have to pay
higher premiums.
It is possible to get insurance for people with higher-than-average risk, but they usually pay
higher premiums.
25. The primary factor that determines how much you will pay for life insurance is:Your
mortality rate.
Mortality rate is the primary determinant of what you will pay for life insurance.
26. The largest component of the loading charge is: the commission to sales agents.
The commission paid to life insurance agents is the largest component of loading charges.
27. The cost of term insurance is generally lower than for other types because:All of the above.
28. John had a term life insurance policy that was for a ten-year term. At the end of that period,
if he wished to renew it for another ten years, he would find that his premiums: Increased.
The premium would be raised because John is older and the probability of his dying is increased.
29. Laurie has decided to get decreasing term insurance while her children are young. With the
passage of time, her income will increase and her need for insurance will diminish. Her
premiums for the decreasing term: Will remain the same.
Premiums for decreasing term insurance remain level for the term of the insurance.
30. Michel had investigated getting private life insurance; then he found out that his employer
offered a group plan, with the same benefits, but at a much lower cost. Why would group
insurance cost less? There is only one policy covering a number of people.
When a single policy covers many people, the selling and administrative costs are lower.
31. Group life insurance is usually a better bargain for:An older worker.
Jasmine, still a single parent, has decided to go back to school. She is getting an education loan
from her bank and the bank suggests that she also purchase credit life insurance. If she should
die, the money from this insurance would:Cover the outstanding balance on her loan.
32. Credit life insurance will reimburse the lending bank for the outstanding amount of the loan.
33. Cash reserves are created with level premiums in whole life insurance because:In the early
years, the policyholder overpays, and underpays in the later years.
The policyholder overpays in the early years and underpays later; the early payments exceed the
pure cost of insurance and create reserves that grow with time.

34. Mr. Pedersen was 82 and had a large amount of cash reserves in his life insurance. His sole
beneficiary was his nephew, Emmett, who had just married a woman Mr. Pedersen did not
approve of. Mr. Pedersen decided to take a trip around the world, using his cash reserves.
When Mr. Pedersen died, Emmett would:Receive the face value of the policy, less the cash
reserves Mr. Pedersen withdrawn.
Any cash reserves taken out will diminish the value of the policy by the same amount.
35. A limited payment policy is a type of whole life in which:Premiums are paid within a limited
time, such as 20 years.
A limited payment policy is completely paid for within a specified period of time.

36. Samantha had a stroke and was unable to pay her life insurance premium on the day it was
due. Three weeks later she remembered and asked a friend to submit the payment. There
was no penalty and the insurance had continued during this time, due to the: Grace period.
A grace period is usually for one month after the premium is due, during which there will be no
penalty for late payment and the policy remains in effect.

37. Jason had been paying his life insurance premiums for a number of years and had some cash
reserves built up. When he went on a business trip to South America, a political group
kidnapped him and held him captive for two years. Upon his return home, he was surprised
to learn that his insurance premiums had continued to be paid. This was due to:The
automatic premium loan.
If a policyholder fails to pay the premiums, the insurance company will use the cash reserves
built up to continue the premium payments, under the automatic premium loan.
38. Uncle Donald paid the monthly premiums on his life insurance with money given to him for
that purpose by his nephew, Huey. In return, Huey was to be named as the irrevocable
beneficiary in Uncle Donald's life insurance policy. When Uncle Donald got angry with Huey
one day, he contacted the insurance company to change the beneficiary to another nephew,
Louie. Which of the following statements is true regarding irrevocable beneficiaries? Huey's
consent was necessary to permit the change to happen.
39. With term insurance, a rider can be added that allows the insured to convert to another
type of insurance before the end of the term without having to have another medical
examination. This is called: Conversion privilege.
Conversion privilege allows a policyholder of term insurance to convert to another type of
insurance before the end of the term, without having to prove insurability.
40. Canadians tend to be ___________ life insured than people in other countries. More