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- Question 1 of 30
1. Question
Which of the following statements best describes premiums as a feature of a natural premium (pricing) system?
CorrectPremiums
A major feature of policies that used the Natural Premium Pricing system is that premiums did not remain level over the course of the plan. It is not to be constant throughout the policy term but individually calculated each year so that they reflected the natural risk position of the life insured at each policy anniversary. While products like Universal Life Insurance have flexible premiums, the premiums of a Natural Pricing plan were individually calculated each year at the policy renewal.IncorrectPremiums
A major feature of policies that used the Natural Premium Pricing system is that premiums did not remain level over the course of the plan. It is not to be constant throughout the policy term but individually calculated each year so that they reflected the natural risk position of the life insured at each policy anniversary. While products like Universal Life Insurance have flexible premiums, the premiums of a Natural Pricing plan were individually calculated each year at the policy renewal. - Question 2 of 30
2. Question
The Natural Premium System is no longer practiced, at least not for policies that are true “long-term”. Which of the following feature is that?
CorrectPresent-day
The natural premium system (or the natural premium pricing system) was used by some life insurers in the early days of the business. The Natural Premium System is no longer practiced, at least not for policies that are true “long-term”.IncorrectPresent-day
The natural premium system (or the natural premium pricing system) was used by some life insurers in the early days of the business. The Natural Premium System is no longer practiced, at least not for policies that are true “long-term”. - Question 3 of 30
3. Question
It is good to distinguish the various products offered by life insurers by what the products seek to do. Which of the following are included in its basic format?
I. Payment on death only if it occurs during a specified period
II. Payment on covered by the death benefit
III. Payment on death at any time
IV. Payment on a or on earlier deathCorrectIt is good to distinguish the various products offered by life insurers by what the products seek to do. Some basic format includes:
• Payment on death only if it occurs during a specified period
• Payment on death at any time
• Payment on a or on earlier deathIncorrectIt is good to distinguish the various products offered by life insurers by what the products seek to do. Some basic format includes:
• Payment on death only if it occurs during a specified period
• Payment on death at any time
• Payment on a or on earlier death - Question 4 of 30
4. Question
Which of the following statements best explains short-term consequences?
CorrectShort-term consequences
With increasing age, there is increased mortality risk and premiums for existing policies therefore increased every year.IncorrectShort-term consequences
With increasing age, there is increased mortality risk and premiums for existing policies therefore increased every year. - Question 5 of 30
5. Question
Which of the following statements are TRUE about level premium system?
I. It is a much more modern pricing method and makes extensive use of mortality tables and actuarial calculations in setting a premium.
II. It was realized that it was possible to quote an annual premium that would remain level (unchanged) for the duration of the contract
III. It was based on a logical system it has a number of fatal flaws which make it largely unworkable for long term insurance products, like life insurance.
IV. It is based on factors which are outlined on the page Life Insurance Premium Factors.CorrectLevel premium system is a much more modern pricing method and makes extensive use of mortality tables and actuarial calculations in setting a premium. It is based on factors which are outlined on the page Life Insurance Premium Factors. It was realized that it was possible to quote an annual premium that would remain level (unchanged) for the duration of the contract.
IncorrectLevel premium system is a much more modern pricing method and makes extensive use of mortality tables and actuarial calculations in setting a premium. It is based on factors which are outlined on the page Life Insurance Premium Factors. It was realized that it was possible to quote an annual premium that would remain level (unchanged) for the duration of the contract.
- Question 6 of 30
6. Question
Which of the following statements is NOT true about the short-term consequences of the level premium system?
CorrectThe level premium system envisages a long-term contract, where an unchanging annual premium will effectively “average out” over the years. It implies that the annual premium is “too much” for the risk involved in early years, and may be “too little” for the risk involved in later years. The premium is calculated each year and at the end of the year the premium is considered fully earned by the insurer.
IncorrectThe level premium system envisages a long-term contract, where an unchanging annual premium will effectively “average out” over the years. It implies that the annual premium is “too much” for the risk involved in early years, and may be “too little” for the risk involved in later years. The premium is calculated each year and at the end of the year the premium is considered fully earned by the insurer.
- Question 7 of 30
7. Question
Which of the following are included in the features that developed from the early years’ “surplus” premiums found with the level premium system?
I. Cash value and the surrender value
II. Policy loan
III. Nonforfeiture
IV. Fund reserveCorrectThe features that developed from the early years’ “surplus” premiums found with the level premium system include cash value and the surrender value, policy loan, nonforfeiture, and paid-up insurance.
IncorrectThe features that developed from the early years’ “surplus” premiums found with the level premium system include cash value and the surrender value, policy loan, nonforfeiture, and paid-up insurance.
- Question 8 of 30
8. Question
Which of the following statements best describes nonforfeiture?
CorrectWithout specific policy provisions to the contrary, a life insurance policy will lapse if renewal premiums are not paid when due. Standard life insurance and long-term care insurance may have nonforfeiture clauses.
IncorrectWithout specific policy provisions to the contrary, a life insurance policy will lapse if renewal premiums are not paid when due. Standard life insurance and long-term care insurance may have nonforfeiture clauses.
- Question 9 of 30
9. Question
Which of the following statements are TRUE about cash value?
I. It the actual sum of money a policyholder will receive if they try to access the cash value of a policy.
II. It is equal to the sum of money that builds inside of a cash–value–generating annuity or permanent life insurance policy.
III. It is the money held in the insurer’s account
IV. It refers to insurance policies that have a death benefit and potential accumulation of cash value over time.CorrectCash value is equal to the sum of money that builds inside of a cash-value–generating annuity or permanent life insurance policy. It is the money held in the insurer’s account. It refers to insurance policies that have a death benefit and potential accumulation of cash value over time.
IncorrectCash value is equal to the sum of money that builds inside of a cash-value–generating annuity or permanent life insurance policy. It is the money held in the insurer’s account. It refers to insurance policies that have a death benefit and potential accumulation of cash value over time.
- Question 10 of 30
10. Question
Which of the following statements best describes paid-up insurance?
CorrectThe policyowner decides that he cannot or does not wish to pay any further premiums, he may, as an alternative to policy surrender, pay up the policy. It falls into the category of traditional insurance plans. The sum assured is limited to the paid-up value. It is calculated as the ratio of the number of premiums paid to the total number of premiums that were supposed to be paid according to the policy multiplied by the sum assured at maturity.
IncorrectThe policyowner decides that he cannot or does not wish to pay any further premiums, he may, as an alternative to policy surrender, pay up the policy. It falls into the category of traditional insurance plans. The sum assured is limited to the paid-up value. It is calculated as the ratio of the number of premiums paid to the total number of premiums that were supposed to be paid according to the policy multiplied by the sum assured at maturity.
- Question 11 of 30
11. Question
Which of the following statements are TRUE about surrender value?
CorrectSurrender value is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity. It is the actual sum of money a policyholder will receive if they try to access the cash value of a policy. Other names include the surrender cash value or, in the case of annuities, annuity surrender value.
IncorrectSurrender value is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity. It is the actual sum of money a policyholder will receive if they try to access the cash value of a policy. Other names include the surrender cash value or, in the case of annuities, annuity surrender value.
- Question 12 of 30
12. Question
Which of the following is a traditional type of life insurance?
CorrectTerm Insurance
Such kind of insurance provides coverage for a specified period or term only, and may also be described as temporary life insurance. It is initially much less expensive when compared to permanent life insurance. Unlike most types of permanent insurance, term insurance has no cash value.IncorrectTerm Insurance
Such kind of insurance provides coverage for a specified period or term only, and may also be described as temporary life insurance. It is initially much less expensive when compared to permanent life insurance. Unlike most types of permanent insurance, term insurance has no cash value. - Question 13 of 30
13. Question
Under what circumstances the policy benefit of term insurance is only payable?
I. The basic policy to provide additional cover.
II. The type of policy (called the plan) may be convertible.
III. The life insured dies during the specified period, or term.
IV. The policy is valid (in force) at the time of death.CorrectThe insurance provides cover for a specified period or term only, and may also be described as temporary life insurance. The policy benefit is only payable if:
• The life insured dies during the specified period, or term
• The policy is valid (in force) at the time of deathIncorrectThe insurance provides cover for a specified period or term only, and may also be described as temporary life insurance. The policy benefit is only payable if:
• The life insured dies during the specified period, or term
• The policy is valid (in force) at the time of death - Question 14 of 30
14. Question
Which of the following statements are TRUE about level term insurance?
I. It involves a level death benefit throughout the policy period.
II. It is the least popular insurance term insurance due to its complexity.
III. In the event of death during the term, the face amount (also known as face value) of the policy is payable.
IV. The level of annual premium usually remains the same throughout the policy term.CorrectThis policy plan involves a level death benefit throughout the policy period. In the event of death during the term, the face amount (also known as face value) of the policy is payable. The level of annual premium usually remains the same throughout the policy term.
IncorrectThis policy plan involves a level death benefit throughout the policy period. In the event of death during the term, the face amount (also known as face value) of the policy is payable. The level of annual premium usually remains the same throughout the policy term.
- Question 15 of 30
15. Question
Which of the following statements are TRUE about decreasing term insurance?
I. It is particularly suited for a temporary need which is reducing.
II. Under this plan, the death benefit decreases annually, or at other specified times.
III. The level of annual premium usually remains the same throughout the policy term.
IV. Because the benefit is continually decreasing and is payable only on death during the term, this is the costliest form of life insurance available.CorrectDecreasing term insurance
Under this plan, the death benefit decreases annually, or at other specified times. The level of annual premium usually remains the same throughout the policy term. Because the benefit is continually decreasing and is payable only on death during the term, this is the cheapest form of life insurance available. It is particularly suited for a temporary need which is reducing.IncorrectDecreasing term insurance
Under this plan, the death benefit decreases annually, or at other specified times. The level of annual premium usually remains the same throughout the policy term. Because the benefit is continually decreasing and is payable only on death during the term, this is the cheapest form of life insurance available. It is particularly suited for a temporary need which is reducing. - Question 16 of 30
16. Question
Which of the following term insurance is popular largely because of its simplicity?
CorrectLevel term insurance
Level term insurance is popular largely because of its simplicity, this is a useful answer to a temporary need which neither increases nor decreases to any significant extent over the period of time involved (perhaps a loan which is not being repaid by instalments).IncorrectLevel term insurance
Level term insurance is popular largely because of its simplicity, this is a useful answer to a temporary need which neither increases nor decreases to any significant extent over the period of time involved (perhaps a loan which is not being repaid by instalments). - Question 17 of 30
17. Question
Which of the following are included in the examples of decreasing term insurance?
I. Health term insurance
II. Family income insurance
III. Mortgage redemption insurance
IV. Credit life insuranceCorrectUnder this plan, the death benefit decreases annually, or at other specified times. Decreasing term insurance includes credit life insurance, family income insurance, and mortgage redemption insurance.
IncorrectUnder this plan, the death benefit decreases annually, or at other specified times. Decreasing term insurance includes credit life insurance, family income insurance, and mortgage redemption insurance.
- Question 18 of 30
18. Question
Which of the following statements best describes credit life insurance?
CorrectCredit life insurance
It is designed to pay the balance of a loan direct to the lender should the borrower die before full repayment of the loan has been made. This plan is usually sold to lending institutions on a group basis to cover the lives of their borrowers.IncorrectCredit life insurance
It is designed to pay the balance of a loan direct to the lender should the borrower die before full repayment of the loan has been made. This plan is usually sold to lending institutions on a group basis to cover the lives of their borrowers. - Question 19 of 30
19. Question
Which of the following insurance insures a death benefit which increases annually or at other intervals?
CorrectIncreasing term insurance
This plan, as the name suggests, ensures a death benefit that increases annually or at other intervals. The increases may be at a fixed percentage, or in line with an agreed index.IncorrectIncreasing term insurance
This plan, as the name suggests, ensures a death benefit that increases annually or at other intervals. The increases may be at a fixed percentage, or in line with an agreed index. - Question 20 of 30
20. Question
Which of the following statements are TRUE about mortgage redemption insurance?
I. It is a typical mortgage loan that is reduced by monthly or other periodic payments.
II. It covers the risk of non-repayment of mortgage loans for any reason.
III. It may be on a joint-life basis, the benefit being payable when the first life dies.
IV. It is decreasing term insurance designed to provide an amount of death benefit which corresponds to the decreasing balance of a mortgage loan.CorrectMortgage redemption insurance is a typical mortgage loan is reduced by monthly or other periodic payments. It is a decreasing term insurance designed to provide an amount of death benefit which corresponds to the decreasing balance of a mortgage loan. It may be on a joint-life basis, the benefit being payable when the first life dies.
IncorrectMortgage redemption insurance is a typical mortgage loan is reduced by monthly or other periodic payments. It is a decreasing term insurance designed to provide an amount of death benefit which corresponds to the decreasing balance of a mortgage loan. It may be on a joint-life basis, the benefit being payable when the first life dies.
- Question 21 of 30
21. Question
Which of the following statements best describes family income insurance?
CorrectFamily income insurance perhaps linked with another policy plan which provides a lump sum payment on death, a family income plan will pay a stated monthly death benefit to the beneficiaries for the remainder of a specified period.
IncorrectFamily income insurance perhaps linked with another policy plan which provides a lump sum payment on death, a family income plan will pay a stated monthly death benefit to the beneficiaries for the remainder of a specified period.
- Question 22 of 30
22. Question
Renewable term insurance can lead to anti-selection, some limitations may be put in place. Which of the following are included in this?
I. Renewals may only be for the original face amount or smaller face amounts.
II. The number of renewals permitted may be restricted.
III. The premium rate for a renewable term policy is usually higher than that for a comparable non-renewable term policy.
IV. The face amount of the permanent plan will be limited to that of the term insurance.CorrectRenewable term insurance can lead to anti-selection, some limitations may be put in place. It includes:
• Renewals may only be for the original face amount or smaller face amounts.
• The number of renewals permitted may be restricted.
• The premium rate for a renewable term policy is usually higher than that for a comparable non-renewable term policy.IncorrectRenewable term insurance can lead to anti-selection, some limitations may be put in place. It includes:
• Renewals may only be for the original face amount or smaller face amounts.
• The number of renewals permitted may be restricted.
• The premium rate for a renewable term policy is usually higher than that for a comparable non-renewable term policy. - Question 23 of 30
23. Question
Which of the following statements best describes convertible term insurance?
CorrectConvertible term insurance
It gives the policyowner a conversion privilege, such as the right to change the policy to a permanent plan without providing evidence of insurability. If this privilege is exercised, the premium for the permanent plan must be calculated on the basis of the standard rate for such a plan based on the attained age of the life insured.IncorrectConvertible term insurance
It gives the policyowner a conversion privilege, such as the right to change the policy to a permanent plan without providing evidence of insurability. If this privilege is exercised, the premium for the permanent plan must be calculated on the basis of the standard rate for such a plan based on the attained age of the life insured. - Question 24 of 30
24. Question
Because anti-selection is a possibility with convertible term insurance plans, restrictions are usually put in place. Which of the following are included in this?
I. Conversion may not be permitted beyond a certain age
II. Conversion may not be permitted after the policy has been in force for say 50% of its specified term
III. The number of conversions permitted may be restricted.
IV. The face amount of the permanent plan will be limited to that of the term insurance.CorrectBecause anti-selection is a possibility with convertible term insurance plan, restrictions are usually put in place:
• Conversion may not be permitted beyond a certain age
• Conversion may not be permitted after the policy has been in force for say 50% of its specified term
• The face amount of the permanent plan will be limited to that of the term insurance.IncorrectBecause anti-selection is a possibility with convertible term insurance plan, restrictions are usually put in place:
• Conversion may not be permitted beyond a certain age
• Conversion may not be permitted after the policy has been in force for say 50% of its specified term
• The face amount of the permanent plan will be limited to that of the term insurance. - Question 25 of 30
25. Question
Which of the following statements best describes endowment Insurance?
CorrectAn endowment plan will pay the face amount when the life insured survives a specified term but upon death, in case he dies within the term. When the life insured survives the insurance period, the policy is said to mature. It pays a lump sum after a specified number of years or upon death.
IncorrectAn endowment plan will pay the face amount when the life insured survives a specified term but upon death, in case he dies within the term. When the life insured survives the insurance period, the policy is said to mature. It pays a lump sum after a specified number of years or upon death.
- Question 26 of 30
26. Question
As with term insurance, the description of the policy must include a reference to the number of years of insurance. There are features to be noted with the endowment Insurance plan. Which of the following are included in this?
I. Premiums are level, normally paid annually, although single premium endowments are possible.
II. Technically the plan is a combination of term insurance and a pure endowment for equal amounts.
III. Such a plan may be on a participating (with-profit) or non-participating (without-profit) basis, at an appropriate premium.
IV. Many variations are possible, such as premiums that increase, or face amounts which change.CorrectAs with term insurance, the description of the policy must include the reference to the number of years of insurance. There are features to be noted with the endowment insurance plan. It includes:
• Premiums are level, normally paid annually, although single premium endowments are possible.
• Technically the plan is a combination of term insurance and a pure endowment for equal amounts.
• Such a plan may be on a participating (with-profit) or non-participating (without-profit) basis, at an appropriate premium.
• Because in principle such a plan provides the best of both worlds (premature death protection and personal savings for the policyowner if the policy matures), these have an apparent attraction.IncorrectAs with term insurance, the description of the policy must include the reference to the number of years of insurance. There are features to be noted with the endowment insurance plan. It includes:
• Premiums are level, normally paid annually, although single premium endowments are possible.
• Technically the plan is a combination of term insurance and a pure endowment for equal amounts.
• Such a plan may be on a participating (with-profit) or non-participating (without-profit) basis, at an appropriate premium.
• Because in principle such a plan provides the best of both worlds (premature death protection and personal savings for the policyowner if the policy matures), these have an apparent attraction. - Question 27 of 30
27. Question
Which of the following plan provides coverage for the life of the insured?
CorrectWhole Life Insurance
Whole life insurance provides coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate.IncorrectWhole Life Insurance
Whole life insurance provides coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate. - Question 28 of 30
28. Question
Which of the following are included in the relevant policy features of whole life insurance?
I. Par or non-par, either plan is permissible
II. The life insured dies during the specified period, or term.
III. Premiums are level but may be subject to different provisions.
IV. Many variations are possible, such as premiums that increase, or face amounts which change, at specified times during the policy’s life, to cater to different needs as time goes by.CorrectIncorrectThe relevant policy features to note in whole life insurance are:
• Par or non-par, either plan is permissible.
• Premiums are level, but may be subject to different provisions.
• Many variations are possible, such as premiums which increase, or face amounts which change, at specified times during the policy’s life, to cater for different needs as time goes by. - Question 29 of 30
29. Question
In whole life insurance, premiums are level but may be subject to different provisions. Which of the following are included in this?
I. Payable throughout life
II. Payable for a limited period
III. Graded premium policy
IV. Premium subject to an age-related limitationCorrectIn whole life insurance, premiums are level, but may be subject to different provisions. It includes:
• Payable throughout life
• Payable for a limited period
• Premium subject to an age-related limitationIncorrectIn whole life insurance, premiums are level, but may be subject to different provisions. It includes:
• Payable throughout life
• Payable for a limited period
• Premium subject to an age-related limitation - Question 30 of 30
30. Question
Which of the following provisions of the premium refers to the policy may specify the number of years during the lifetime of the life insured for premium payments?
CorrectPayable for a limited period
Payable for a limited period refers to the policy may specify a number of years during the lifetime of the life insured for premium payments.IncorrectPayable for a limited period
Payable for a limited period refers to the policy may specify a number of years during the lifetime of the life insured for premium payments.