TRADITIONAL LIFE

1. Both endowment and term life policies provide that ____

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

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

A) To convey to the company the desire of the applicant to obtain insurance
B) To give details pertaining to non-forfeiture options
C) To furnish information on which the contract of life insurance may be written
D) To furnish initial information as to insurability

3. 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) Revocable primary beneficiary
B) Irrevocable secondary beneficiary
C) Irrevocable primary beneficiary
D) Absolute assignee

4. A policy where an irrevocable beneficiary has been designated the insured, without the beneficiary’s permission, can

A) Discontinue premium payments
B) Alter the dividend option now in effect
C) Avail of a non-forfeiture option
D) Borrow minimal cash loan

5. What are the basic settlement options?

A) Cash surrender value, automatic premium loan
B) Double indemnity, total and permanent disability waiver
C) Policy loan, guaranteed insurability
D) Fixed amount, fixed period, life income, interest on deposit

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) Company discovers during the contestable period that the application contains a material statement.
D) Insured person is killed in military action during the contestable period of the policy

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

A) To establish and maintain high professional and ethical standards
B) To protect the public
C) To provide additional income to the government through license fees
D) To give the government adequate control over the conduct of agents

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

A) The policy will automatically terminate
B) The premiums cease and protection continues with a reduced amount of Coverage
C) The insurance continues at a reduced amount and with a reduced premium
D) The premiums stop and the policy continues for the full face amount until age 65

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

A) Obtains written consent from his or her spouse
B) Momentarily assigns the policy to the company
C) Buys a new plan altogether
D) Presents satisfactory evidence of insurability

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

A) Universal life
B) None of the above
C) Participating whole life policy
D) Participating endowment

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

A) The insured has to die while disabled
B) It has to be attached to a life insurance policy
C) There is a waiting period
D) Disability must occur before a stated date

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

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

13. Paid-up additions

A) Don’t affect the loan or cash value of the policy
B) Affect both cash and loan value of the policy
C) Only affect the cash value of the policy
D) Don’t affect the cash value of the policy

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

A) An interim term rider
B) A supplemental term rider
C) None of the above
D) An accidental death benefit rider

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

A) Develop statistics of past deaths among the general population
B) Estimate future death rates among members of a given group
C) Predict when an individual insured will die
D) Determine the experienced death rate among the insured persons

16. In the case of renewable term insurance, the policy owner may

A) Renew at the same premium for further period of years
B) Renew the coverage based on a higher premium
C) Renew providing the insurance company agrees to continue coverage
D) Change the life insured at renewal date

17. A man applied for a PhP 20,000 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) Guarantees the policy will be issued as applied for
B) Offers permanent insurance coverage effective as of the date of the application
C) Promises that the insurance coverage will become effective as of the date the application is approved
D) Immediately provides interim insurance that remains in effect until the policy is issued or the application is declined

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

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

A) Total needs selling
B) Multiple products selling
C) Counselor selling
D) Planned selling

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

A) Paid-up insurance additions
B) Extended term insurance
C) Life income option pension
D) Reduced paid-up insurance

21. 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) Life annuity option
B) Periodic annuity option
C) Fixed income option
D) Interest option

22. 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) Date of the last medical examination
D) Financial condition of the applicant

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

A) Pressure selling
B) The level of first year commission
C) Agent’s service oriented attitude
D) The use of effective needs selling

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

A) Government tax records
B) The applicant’s personal appearance
C) Medical examination report
D) Agent’s inspection report

25. If the applicant for life insurance fails to disclose or misrepresents 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) Valid unless the insurer can prove fraud
D) Voidable by the insurer if it has been in force less than 2 years

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

A) Proceeds held by the company, with interest payable to the beneficiary on request
B) Payments of the proceeds in fixed amounts until exhausted
C) Payment of the proceeds for the life of the insured
D) Payment of the proceeds over a fixed period

27. 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 to the policyowner that

A) The premium on the policy will remain the same even when another beneficiary is added to the policy
B) No death claim will be denied for any misstatement on the application
C) The face amount of the policy will remain the same even if the insured’s health becomes impaired
D) Any guaranteed policy values will belong to the policy owner even if premium payments are discounted

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

A) Concentration of premium payments during the period of highest earnings
B) More rapid accumulation of cash values
C) More insurance protection for the same annual premiums outlay
D) Liberal risk selection procedures

29. 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 If the interest on a policy loan is not paid at the policy anniversary the insurance

30. 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
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

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

A) An individual on the life of his mistress
B) A finance company on the life of its borrower
C) An individual on his own life
D) An individual on the life of his spouse

32. The basic coverage provided by the life insurance policies may be supplemented by a separate provision that provides coverage for accidental amounts or of a different nature. Collectively these provisions are known as

A) deposit privileges
B) riders
C) dividends
D) assignment

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

A) Cash is required for all premiums paid in the grace period
B) Premiums which are paid quarterly or semi-annually are higher than those paid annually
C) The grace period is usually 31 days
D) A premium is the legal consideration needed to affectuate a life insurance policy

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

A) Chooses a mode of settlement for the life proceeds
B) Renews a term life policy
C) Discontinues premium payments for a whole life or endowment policy
D) Converts a term policy to a whole life policy

35. 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) Demand full settlement of the loan
D) Refuse to grant future additional loan

36. The incontestability clause

A) Makes it necessary for the beneficiary to present proof of death in the event of a death claim
B) Permits the company to pay claims within 2 years
C) Prevents the company from denying a claim after the policy has been in force for 2 years
D) Gives the company the right to rescind a policy at any time

37. The insured named a primary and secondary revocable beneficiary for PhP 20,000 policy. Which of the following is correct?

A) Upon the insured’s death the primary and secondary beneficiaries shall each receive PhP 10,000
B) Any policy loan assignment will require the primary beneficiary’s signature
C) The insured can add a third beneficiary at any time
D) The designation of a contingent beneficiary is subject to the primary beneficiary’s approval

38. 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) The face amount
B) The face amount adjusted for misstatement of age
C) The sum of the premium paid
D) Slightly less than the face amount

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

A) Terminate the contract
B) Increase the present loan by the interest
C) Refuse to grant future additional loan
D) Demand full settlement of the loan

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

A) Evidence of insurability shall be required every renewal
B) The policyowner may renew the policy only once
C) Premiums shall increase every time the policy is renewed
D) Cash values will increase for as long as the policy is in force

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

A) TRUE
B) FALSE

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

A) TRUE
B) FALSE

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

A) FALSE
B) TRUE

44. 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 has availed of paid up insurance option.

A) TRUE
B) FALSE

45. 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.

A) FALSE
B) TRUE

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

A) TRUE
B) FALSE

47. 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 hours) each week.

A) TRUE
B) FALSE

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

A) TRUE
B) FALSE

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

A) TRUE
B) FALSE

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

A) FALSE
B) TRUE

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