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- Question 1 of 30
1. Question
Which of the following statements are TRUE about guaranteed insurability options?
I. A guaranteed insurability rider can increase the coverage on a life insurance policy without taking another medical exam.
II. It is also known as a guaranteed purchase option rider.
III. It reduces the purchasing power of money and it is an important element to be considered with any long-term insurance linked to a specified face amount.
IV. It works by allowing the option of purchasing additional coverage every three or five years on the anniversary date of the original policy.CorrectA guaranteed insurability option can increase the coverage on life insurance policy without taking another medical exam. It is also known as a guaranteed purchase option rider. It works by allowing the option of purchasing additional coverage every three or five years on the anniversary date of the original policy.
IncorrectA guaranteed insurability option can increase the coverage on life insurance policy without taking another medical exam. It is also known as a guaranteed purchase option rider. It works by allowing the option of purchasing additional coverage every three or five years on the anniversary date of the original policy.
- Question 2 of 30
2. Question
In the guaranteed purchase option, which of the following is TRUE about its limitations?
CorrectThe amount of additional coverage may be limited (to the existing policy’s face amount, or less). Also, the right must be exercised before the life insured reaches a certain age (typically aged 40).
IncorrectThe amount of additional coverage may be limited (to the existing policy’s face amount, or less). Also, the right must be exercised before the life insured reaches a certain age (typically aged 40).
- Question 3 of 30
3. Question
One of the features of a guaranteed purchase option is the temporary cover. Which of the following statements best explains temporary cover?
CorrectTemporary cover
Some insurers grant term insurance cover automatically to cover the policyowner-insured during the period allowed for exercising his purchase option so that if he dies before completing the option he will still have extra term insurance cover.IncorrectTemporary cover
Some insurers grant term insurance cover automatically to cover the policyowner-insured during the period allowed for exercising his purchase option so that if he dies before completing the option he will still have extra term insurance cover. - Question 4 of 30
4. Question
Without having to supply evidence of insurability in GI benefit, the policyowner has the right to purchase additional insurance on which of the following?
I. On the specified beneficiary
II. On specified option dates
III. At specified ages
IV. When a specified event happensCorrectThe policyowner has the right to purchase additional insurance (of course for an additional premium) on specified option dates, at specified ages, or when a specified event happens, without having to supply evidence of insurability.
IncorrectThe policyowner has the right to purchase additional insurance (of course for an additional premium) on specified option dates, at specified ages, or when a specified event happens, without having to supply evidence of insurability.
- Question 5 of 30
5. Question
What will happen if the insurance also has a Disability Waiver of Premium Rider and the policyowner-insured is disabled at the time he is entitled to exercise an option for additional cover?
CorrectIf the insurance also has a Disability Waiver of Premium rider and the policyowner-insured is disabled at the time he is entitled to exercise an option for additional cover, the additional cover will granted be automatically. The WP rider also provides for all premiums to be waived, until the recovery or death of the policyowner-insured.
IncorrectIf the insurance also has a Disability Waiver of Premium rider and the policyowner-insured is disabled at the time he is entitled to exercise an option for additional cover, the additional cover will granted be automatically. The WP rider also provides for all premiums to be waived, until the recovery or death of the policyowner-insured.
- Question 6 of 30
6. Question
Which of the following statements are TRUE about inflation?
I. It reduces the purchasing power of money.
II. It is the decline of purchasing power of a given currency over time.
III. It is usually associated with a contraction in the supply of money and credit.
IV. It is an important element to be considered with any long-term insurance linked to a specified face amount.CorrectInflation
Inflation reduces the purchasing power of money. It is the decline of purchasing power of a given currency over time. It is an important element to be considered with any long-term insurance linked to a specified face amount. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time.IncorrectInflation
Inflation reduces the purchasing power of money. It is the decline of purchasing power of a given currency over time. It is an important element to be considered with any long-term insurance linked to a specified face amount. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. - Question 7 of 30
7. Question
Which of the following refers to a rider or a policy provision that provides for periodic increases in the disability income benefits being paid to disabled policyowner-insured?
CorrectCost of Living Adjustment (COLA) Benefit
This rider or policy provision provides for periodic increases in the disability income benefits being paid to disabled policyowner-insured. It depends on the CPI-W from the third quarter of the previous year to the third quarter of the current year.IncorrectCost of Living Adjustment (COLA) Benefit
This rider or policy provision provides for periodic increases in the disability income benefits being paid to disabled policyowner-insured. It depends on the CPI-W from the third quarter of the previous year to the third quarter of the current year. - Question 8 of 30
8. Question
The “entire contract” provisions are therefore very important. Which of the following are included in this?
I. It states that the insurer will not contest the contract after it has been in force during the lifetime of the life insured for two years from the date of issue.
II. Only certain specified senior officials of the company are authorized to make changes to the contract.
III. No change to the contract will be effective unless made in writing.
IV. No change to the contract can be made unless the policyowner agrees to it in writing.CorrectThe “entire contract” provisions are therefore very important. They provide that:
• The entire contract consists of the policy, any attached riders and the attached copy of the application (such an insurance contract being termed a closed contract).
• Only certain specified senior officials of the company are authorized to make changes to the contract.
• No change to the contract will be effective unless made in writing.
• No change to the contract can be made unless the policyowner agrees to it in writing.IncorrectThe “entire contract” provisions are therefore very important. They provide that:
• The entire contract consists of the policy, any attached riders and the attached copy of the application (such an insurance contract being termed a closed contract).
• Only certain specified senior officials of the company are authorized to make changes to the contract.
• No change to the contract will be effective unless made in writing.
• No change to the contract can be made unless the policyowner agrees to it in writing. - Question 9 of 30
9. Question
Which of the following statements best describes hospital charges?
CorrectHospital charges are very likely to have three different categories, according to choice and premium paid, the usual descriptions being private room, semi-private room, and ward bed. Cover includes room and board, miscellaneous hospital services, and an available supplement for intensive care treatment
IncorrectHospital charges are very likely to have three different categories, according to choice and premium paid, the usual descriptions being private room, semi-private room, and ward bed. Cover includes room and board, miscellaneous hospital services, and an available supplement for intensive care treatment
- Question 10 of 30
10. Question
Hospital charges are very likely to have three different categories, according to choice and premium paid. Which of the following are included in this?
I. Private nursing
II. Semi-Private Room
III. Private Room
IV. Ward BedCorrectHospital charges very likely to have three different categories, according to choice and premium paid, the usual descriptions being Private Room, Semi-Private Room and Ward Bed.
IncorrectHospital charges very likely to have three different categories, according to choice and premium paid, the usual descriptions being Private Room, Semi-Private Room and Ward Bed.
- Question 11 of 30
11. Question
Under Hong Kong law, which of the following cannot be relied upon in the event of fraud on the part of the claimant or the insured?
CorrectIncontestable Clause
Under Hong Kong law, an Incontestable Clause cannot be relied upon in the event of fraud on the part of the claimant or the insured. Hong Kong law will not support fraud, whatever a contract may say.IncorrectIncontestable Clause
Under Hong Kong law, an Incontestable Clause cannot be relied upon in the event of fraud on the part of the claimant or the insured. Hong Kong law will not support fraud, whatever a contract may say. - Question 12 of 30
12. Question
Which of the following statements best describes incontestability provision?
CorrectIncontestability provision
This means that within the terms of these provisions the validity of the contract cannot be contested (challenged) by the insurer. Disputes over the validity of an insurance contract may arise with an alleged breach of utmost good faith, i.e. certain material facts have been omitted or misrepresented.IncorrectIncontestability provision
This means that within the terms of these provisions the validity of the contract cannot be contested (challenged) by the insurer. Disputes over the validity of an insurance contract may arise with an alleged breach of utmost good faith, i.e. certain material facts have been omitted or misrepresented. - Question 13 of 30
13. Question
Which of the following are included in the typical Incontestability Provision (or Incontestable Clause)?
I. It states that the insurer will not (normally – see below) contest the contract after it has been in force during the lifetime of the life insured for two years from the date of issue.
II. Under Hong Kong law, it cannot be relied upon in the event of fraud on the part of the claimant or the insured. Hong Kong law will not support fraud, whatever a contract may say.
III. A situation of conflicting claims may arise, possibly from policy beneficiaries, assignees, trustees of the policy, trust beneficiaries, trustees-in-bankruptcy, and personal representatives.
IV. Such a clause would not have the effect of preventing the insurer from raising the question of illegality.CorrectThe typical Incontestability Provision states that the insurer will not contest the contract after it has been in force during the lifetime of the life insured for two years from the date of issue. Under Hong Kong law, an Incontestable Clause cannot be relied upon in the event of fraud on the part of the claimant or the insured. Hong Kong law will not support fraud, whatever a contract may say. Such a clause would not have the effect of preventing the insurer from raising the question of illegality.
IncorrectThe typical Incontestability Provision states that the insurer will not contest the contract after it has been in force during the lifetime of the life insured for two years from the date of issue. Under Hong Kong law, an Incontestable Clause cannot be relied upon in the event of fraud on the part of the claimant or the insured. Hong Kong law will not support fraud, whatever a contract may say. Such a clause would not have the effect of preventing the insurer from raising the question of illegality.
- Question 14 of 30
14. Question
Which of the following statements best describes the grace period?
CorrectGrace period
Essentially, this relates to a period of time after the date on which a premium is due when the cover is kept operative. The insurance grace period can vary depending on the insurer and policy type. Depending on the insurance policy, the grace period can be as little as 24 hours or as long as 30 days.IncorrectGrace period
Essentially, this relates to a period of time after the date on which a premium is due when the cover is kept operative. The insurance grace period can vary depending on the insurer and policy type. Depending on the insurance policy, the grace period can be as little as 24 hours or as long as 30 days. - Question 15 of 30
15. Question
Which of the following are included in the provisions of the grace period?
I. The grace period is usually a minimum of 30 or 31 days
II. Payment of premium within the grace period is deemed to be paid on time
III. The grace period does not apply to the initial premium for the policy
IV. The grace period may be up to the policy cash value.CorrectThe provisions of the grace period include:
• The grace period is usually a minimum of 30 or 31 days
• The grace period does not apply to the initial premium for the policy
• Payment of premium within the grace period is deemed to be paid on time
• This is not a period of free insurance
• Special provisions may arise with non-traditional types of policy, e.g. universal life policy.IncorrectThe provisions of the grace period include:
• The grace period is usually a minimum of 30 or 31 days
• The grace period does not apply to the initial premium for the policy
• Payment of premium within the grace period is deemed to be paid on time
• This is not a period of free insurance
• Special provisions may arise with non-traditional types of policy, e.g. universal life policy. - Question 16 of 30
16. Question
A grace period is a set length of time after the due date during which payment may be made without penalty. Under U.K. style policies, what does the “Grace Period” is also known as?
CorrectDays of grace
Under U.K. style policies, this is also called “Days of Grace”. Essentially, this relates to a period of time after the date on which a premium is due when the cover is kept operative. But for this grace period provision, the policy would lapse if the premium is not paid by the due date.IncorrectDays of grace
Under U.K. style policies, this is also called “Days of Grace”. Essentially, this relates to a period of time after the date on which a premium is due when the cover is kept operative. But for this grace period provision, the policy would lapse if the premium is not paid by the due date. - Question 17 of 30
17. Question
Which of the following statements is TRUE about the beneficiary?
I. It is usually named in the policy.
II. It is a person to whom the policyowner of a life policy instructs the insurer to pay the death benefit when it is due.
III. A fundamental condition for the payment is that the beneficiary must survive the life insured.
IV. If the beneficiary dies within the grace period before payment of the premium, the premium due will be deducted from the death benefit payable.CorrectBeneficiary is usually named in the policy. It refers to a person to whom the policyowner of a life policy instructs the insurer to pay the death benefit when it is due. A fundamental condition for the payment is that the beneficiary must survive the life insured.
IncorrectBeneficiary is usually named in the policy. It refers to a person to whom the policyowner of a life policy instructs the insurer to pay the death benefit when it is due. A fundamental condition for the payment is that the beneficiary must survive the life insured.
- Question 18 of 30
18. Question
In practice, there are various types of designations and beneficiaries. Which of the following are included in this?
I. Class designations (i.e. identification of a certain group of people as beneficiaries instead of naming each of the persons) can alternatively be done.
II. The primary (or first) beneficiary receives the death benefit, when payable (if more than one is designated, shares will be equal unless otherwise specified in the policy).
III. A life policy usually does not allow the policyowner to change the beneficiary designation whilst the policy is in force, in which case the designated beneficiary is called a “revocable beneficiary”.
IV. The wording of the typical beneficiary designation provision is apparently simple, giving rise to a general belief that any payable death benefit will certainly be paid to the beneficiary.CorrectIn practice, there are various types of designations and beneficiaries. It includes:
• Class designations (i.e. identification of a certain group of people as beneficiaries instead of naming each of the persons) can alternatively be done.
• The primary (or first) beneficiary receives the death benefit, when payable (if more than one is designated, shares will be equal unless otherwise specified in the policy).
• A life policy usually allows the policyowner to change the beneficiary designation whilst the policy is in force, in which case the designated beneficiary is called a “revocable beneficiary”.
• The wording of the typical beneficiary designation provision is apparently simple, giving rise to a general belief that any payable death benefit will certainly be paid to the beneficiary.IncorrectIn practice, there are various types of designations and beneficiaries. It includes:
• Class designations (i.e. identification of a certain group of people as beneficiaries instead of naming each of the persons) can alternatively be done.
• The primary (or first) beneficiary receives the death benefit, when payable (if more than one is designated, shares will be equal unless otherwise specified in the policy).
• A life policy usually allows the policyowner to change the beneficiary designation whilst the policy is in force, in which case the designated beneficiary is called a “revocable beneficiary”.
• The wording of the typical beneficiary designation provision is apparently simple, giving rise to a general belief that any payable death benefit will certainly be paid to the beneficiary. - Question 19 of 30
19. Question
Which of the following type of beneficiary where one or more contingent beneficiaries may be designated in case all the beneficiaries do not survive the life insured?
CorrectThe primary (or first) beneficiary receives the death benefit, when payable (if more than one is designated, shares will be equal unless otherwise specified in the policy). One or more Contingent Beneficiaries may be designated in addition to primary beneficiaries, in case all the primary beneficiaries do not survive the life insured.
IncorrectThe primary (or first) beneficiary receives the death benefit, when payable (if more than one is designated, shares will be equal unless otherwise specified in the policy). One or more Contingent Beneficiaries may be designated in addition to primary beneficiaries, in case all the primary beneficiaries do not survive the life insured.
- Question 20 of 30
20. Question
The wording of the typical beneficiary designation provision is apparently simple, giving rise to a general belief that any payable death benefit will certainly be paid to the beneficiary. In fact, a situation of conflicting claims may arise, possibly from which of the following?
I. Respective estate of the beneficiaries
II. Policy beneficiaries
III. Assignees
IV. Trustees of the policyCorrectThe wording of the typical beneficiary designation provision is apparently simple, giving rise to a general belief that any payable death benefit will certainly be paid to the beneficiary. In fact, a situation of conflicting claims may arise, possibly from policy beneficiaries, assignees, trustees of the policy, trust beneficiaries, trustees-in-bankruptcy, and personal representatives.
IncorrectThe wording of the typical beneficiary designation provision is apparently simple, giving rise to a general belief that any payable death benefit will certainly be paid to the beneficiary. In fact, a situation of conflicting claims may arise, possibly from policy beneficiaries, assignees, trustees of the policy, trust beneficiaries, trustees-in-bankruptcy, and personal representatives.
- Question 21 of 30
21. Question
Which of the following statements best describes nonforfeiture benefits?
CorrectNonforfeiture benefits
It is an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment. It is an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment.IncorrectNonforfeiture benefits
It is an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment. It is an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment. - Question 22 of 30
22. Question
The owner of a policy that has a cash value or dividend value, who decides not to pay any more premiums, may exercise any one of the options. Which of the following are included in this?
I. Cash surrender value
II. Start-up insurance
III. Reduced paid-up insurance
IV. Extended term insuranceCorrectThe owner of a policy that has a cash value or dividend value, who decides not to pay any more premiums, may exercise any one of the following options.
• Cash surrender value
• Reduced paid-up insurance
• Extended term insuranceIncorrectThe owner of a policy that has a cash value or dividend value, who decides not to pay any more premiums, may exercise any one of the following options.
• Cash surrender value
• Reduced paid-up insurance
• Extended term insurance - Question 23 of 30
23. Question
Which of the following statements is TRUE about reduced paid-up insurance?
CorrectReduced paid-up insurance
In reduced paid-up insurance the net cash value is used as a single premium to purchase life insurance of the same plan as the original policy for a lower amount of cover. It is a non-forfeiture option available only on whole life policies, which gives the policyowner the right to a fully paid-up policy for some reduced amount guaranteed death benefit when they are ready to stop paying premiums.IncorrectReduced paid-up insurance
In reduced paid-up insurance the net cash value is used as a single premium to purchase life insurance of the same plan as the original policy for a lower amount of cover. It is a non-forfeiture option available only on whole life policies, which gives the policyowner the right to a fully paid-up policy for some reduced amount guaranteed death benefit when they are ready to stop paying premiums. - Question 24 of 30
24. Question
Which of the following statements is TRUE about extended term insurance?
CorrectExtended-term insurance
In extended term insurance, the net cash value is used as a single premium to purchase term insurance for the same amount as the original face amount, for such period as the net cash value can provide. It allows a policyholder to quit paying the premiums but not forfeit the equity of their policy.IncorrectExtended-term insurance
In extended term insurance, the net cash value is used as a single premium to purchase term insurance for the same amount as the original face amount, for such period as the net cash value can provide. It allows a policyholder to quit paying the premiums but not forfeit the equity of their policy. - Question 25 of 30
25. Question
Which of the following is TRUE about cash surrender value?
CorrectCash surrender value is also known as surrender value, cash surrender value is paid when the policyowner terminates the policy. It is the sum of money an insurance company pays to a policyholder or an annuity contract owner in the event that their policy is voluntarily terminated before its maturity or an insured event occurs.
IncorrectCash surrender value is also known as surrender value, cash surrender value is paid when the policyowner terminates the policy. It is the sum of money an insurance company pays to a policyholder or an annuity contract owner in the event that their policy is voluntarily terminated before its maturity or an insured event occurs.
- Question 26 of 30
26. Question
Under U.K. life insurance practice, which of the following is also known as “Policy Revival”?
CorrectUnder U.K. life insurance practice, reinstatement is also known as “Policy Revival”. The concept is that a policy that has lapsed (died) can be brought back to “life” under certain circumstances. During the revival period, the policy is reinstated on the basis of certain conditions. In one case, the policyholder needs to pay the interest along with the unpaid premium.
IncorrectUnder U.K. life insurance practice, reinstatement is also known as “Policy Revival”. The concept is that a policy that has lapsed (died) can be brought back to “life” under certain circumstances. During the revival period, the policy is reinstated on the basis of certain conditions. In one case, the policyholder needs to pay the interest along with the unpaid premium.
- Question 27 of 30
27. Question
Which of the following statements best describes policy loan?
CorrectPolicy loan
A policy loan is issued by an insurance company and uses the cash value of a person’s life insurance policy as collateral. Sometimes it is referred to as a “life insurance loan.” It can be taken if you have a universal or whole life insurance policy and if you have accumulated cash value in them.IncorrectPolicy loan
A policy loan is issued by an insurance company and uses the cash value of a person’s life insurance policy as collateral. Sometimes it is referred to as a “life insurance loan.” It can be taken if you have a universal or whole life insurance policy and if you have accumulated cash value in them. - Question 28 of 30
28. Question
Another feature directly arising from the existence of a policy cash value, is the facility of borrowing money from the insurer, using the cash value as security. Which of the following are included in the customary policy loan provisions?
I. The policyowner has a right to borrow money from the insurer
II. There is a time limit within which this may be demanded
III. The loan may be for any purpose
IV. The loan may be up to the policy cash valueCorrectThe customary policy loan provisions include:
• The policyowner has a right to borrow money from the insurer
• The loan may be for any purpose
• The loan may be up to the policy cash value (less one year’s loan interest)
• The only security required for the loan is the policy cash value
• The applicable interest rate may be subject to a prescribed maximum
• The amount and timing of any repayments are at the discretion of the policyowner, and any unpaid interests will become part of the policy loan
• The amount of any outstanding loan (including any unpaid interests) will be deducted from the death benefit or surrender value that is payableIncorrectThe customary policy loan provisions include:
• The policyowner has a right to borrow money from the insurer
• The loan may be for any purpose
• The loan may be up to the policy cash value (less one year’s loan interest)
• The only security required for the loan is the policy cash value
• The applicable interest rate may be subject to a prescribed maximum
• The amount and timing of any repayments are at the discretion of the policyowner, and any unpaid interests will become part of the policy loan
• The amount of any outstanding loan (including any unpaid interests) will be deducted from the death benefit or surrender value that is payable - Question 29 of 30
29. Question
Which of the following statements best describes reinstatement?
CorrectReinstatement means a person’s previously terminated policy can resume if the already insured meets the specific requirements for reinstatement. It only happens after the grace period has ended, and the life insurance contract is no longer in force. The ability to reinstate a policy is not guaranteed by law, so the availability of this feature may differ between life insurance providers.
IncorrectReinstatement means a person’s previously terminated policy can resume if the already insured meets the specific requirements for reinstatement. It only happens after the grace period has ended, and the life insurance contract is no longer in force. The ability to reinstate a policy is not guaranteed by law, so the availability of this feature may differ between life insurance providers.
- Question 30 of 30
30. Question
Which of the following options arise when the insurer receives notice of a decision to discontinue premium payments?
CorrectExtended-term insurance
It allows a policyholder to quit paying the premiums but not forfeit the equity of their policy. These options arise when the insurer receives notice of a decision to discontinue premium payments. If premium payments merely stop, with no notice of selection from the policyowner, the automatic provision will be triggered.IncorrectExtended-term insurance
It allows a policyholder to quit paying the premiums but not forfeit the equity of their policy. These options arise when the insurer receives notice of a decision to discontinue premium payments. If premium payments merely stop, with no notice of selection from the policyowner, the automatic provision will be triggered.