MOCK EXAM I : Insurance Institute for Asia and the Pacific

INSTRUCTION : Encircle the best answer.

1. A policyholder may obtain money from the insurance company and still remain insured by

a. Surrendering the policy for its cash value

b. Discontinuing payment of premium for some period
c. Taking a policy loan
d. Taking the extended insurance option

2. 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 premium paid
d. Slightly less than the face amount

3. When explaining dividends, the following information must be supplied

a. That they are not guaranteed

b. The dividends paid up in the previous year
c. The anticipated endowments
d. The relation to the cost of the policy

4. If the insured dies during the grace period of an unpaid life insurance policy, the amount
payable to the beneficiary is usually the

a. Total premiums paid plus interest

b. Cash surrender value of the policy minus the unpaid premiums
c. Face amount of the policy minus the unpaid premiums
d. Full face amount

5. The typical grace period provision in a life insurance policy obliges the life insurance company
to

a. Establish a policy loan to cover any premium which the policyowner fails to pay by
due date
b. Keep the policy in force for the duration of any major disability suffered by the
policyowner
c. Allow the policyowner a three-month extension beyond the due date to make the late
premium payment without penalty
d. None of the above

6. An automatic premium loan differs from the other policy loans in that an automatic premium
loan

a. Need not be repaid by the policyowner

b. Must be repaid during the policy year in which it is granted
c. Goes into effect requiring no separate action from the policyowner
d. Involves higher interest payments because of the greater cost of administration

7. When a policy is assigned absolutely

a. The assignee acquires all the rights and interests of the original policyholder
b. The original policyholder still can exercise some of the rights
c. The original beneficiary is not changed
d. None of the above

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8. If a policy did not contain the name of a beneficiary, the beneficiary will be

a. The wife
b. The children
c. The insured’s brothers and sisters
d. The insured’s estate

9. If a policyowner does not pay a premium on the due date, the policy will immediately

a. Lapse
b. Be converted to a paid-up policy for a lesser amount
c. Go into automatic premium loan
d. Continue in full force for a grace period

10. If a policyowner whose wife is the irrevocable beneficiary wishes to cash in his policy, he must

a. Tell his wife what he is going to do

b. First take a loan in the policy
c. Have the check issued in the name of his wife
d. Have the wife’s consent

11. Choose the incorrect statement

The entire contract between the policyowner and the insurance company include

a. The application and the policy

b. Any verbal statement made by the agent to the applicant
c. Any document attached to the policy when issued
d. Any subsequent written amendments to the contract

12. If a loan is taken on a participating policy, dividends for that policy while there is a loan against
the policy will be

a. Suspended
b. Paid a reduced rate
c. Unaffected
d. Increased

13. Interest charged on policy loans

a. For registered policies only

b. If the loan is outstanding for more than a year, a loan required within a year is interest
free
c. To replace investment income the insurer cannot earn since a loan has been
granted
d. For participating policies only

14. An insurance plan which offers both protection and savings is called

a. Temporary Plan c. Participating Plan

b. Permanent Plan d. Non-participating Plan

15. A man with moderate means can have maximum protection possible through

a. 20-Yr. Endowment c. Term Insurance

b. Limited Pay Life d. Whole Life Insurance

16. Mr. Juan Valdez wants a policy which will entitle him to receive dividends yearly. What will you
recommend to Mr. Valdez?

a. Participating Plans c. Term Insurance

b. Non-participating Plans d. None of the above
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17. Which of the following can give the longest protection?

a. 20-Yr. Endowment c. Ordinary Life

b. Endowment at 65 d. 20-Yr. Term

18. 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 still alive at that date. The policy is obviously a

a. 20-Yr. Endowment c. 20-Yr. Term

b. 20 Pay Life d. None of the above

19. In a 20 Life policy

a. Protection is until age 100, payment or premium is for age 20 years

b. Protection is until age 100, payment of premiums until age 100
c. Protection is for 20 years, payment of premium is for 20 years
d. Protection is for 20 years, payment of premiums until age 100
e.

20. A participating plan entitles the policyowner to receive a return of excess premiums. Such is
termed as:
a. Endowments c. cash values
b. Dividends d. cash surrender value

21. Mrs. Rose Cortez owns a policy which does not provide for the build up of cash values and
whose premiums remain level, Mrs. Cortez owns

a. Ordinary Life c. Decreasing Term

b. Limited Pay Life d. Level Term

22. Two attractive features of a term insurance are:

a. Convertibility and cash values
b. Cash values and dividends
c. Protection and dividends
d. Convertibility and renewability

23. A term insurance which allows the policyowners to convert it to a permanent insurance within
a specified period without evidence of insurability contains ____________ feature:

a. Convertibility c. Dividend Option

b. Renewability d. Both a & b

24. A term policy only offers

a. Cash Values c. Savings

b. Protection d. Dividends

25. The main difference between a term plan and a permanent plan is

a. Permanent plans provide both protection and savings while term plan offers
protection only
b. Permanent plans provide savings and dividends while term plans provide savings
c. Permanent plans can be converted and renewed while term plans cannot
d. All of the above

26. The savings element of permanent plans allows for the build up of

a. Dividends c. Maturity Benefits

b. Cash Values d. Death Benefits

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27. A term rider is

a. A term policy with a waiver of premium

b. Another name for a convertible term policy
c. A renewable term policy
d. A term insurance added to a permanent plan

28. An optional rider which can be attached to a policy stopping further premium payments in the
event of disability is called

a. Policyholder protection clause

b. Accidental death and dismemberment
c. Waiver of premium
d. Total disability monthly income

29. For the 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

30. If a policy with the accidental death rider becomes paid-up

a. The accidental death rider ceases

b. The face amount of the policy is reduced
c. Premiums on the basic policy stop but the rider premiums continue
d. None of the above

31. Disability benefits are not paid

a. For self-inflicted injuries

b. If there is a loan against the policy
c. If all the policy dividends have been withdrawn
d. If disability resulted from sickness only

32. Mr. Pedro Cruz became paralyzed as a result of jumping out of the window in an attempt to
commit suicide. Under the usual provisions of a disability income policy, he would be entitled
to

a. Receive the total disability income benefit and the waiver of premiums
b. Receive partial disability benefits
c. Be granted the waiver of premiums
d. Receive neither disability income nor waiver of premiums

33. 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. A Waiver of Premium c. Guaranteed Insurability Offer

b. Term Insurance Rider d. Accidental Death Rider

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

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

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35. If an insured is disabled and his life insurance policy is being continued in force through the
waiver of premiums, the dividends of the policy would

a. Cease
b. Continue at a reduced rate
c. Continue as if the owner is paying the premium
d. Continue but they would be applied toward premium being waived

36. A policy with a minor as the proposed insured is called

a. Rated policy
b. Juvenile policy
c. Regular policy
d. Substandard policy

37. Life insurance policies for which higher than standard premium rates are payable are said to
be

a. Rated policies c. Non-Participating policies

b. Contingent policies d. Conditional policies

38. Since the purchase of the life insurance is a voluntary choice, the individual must meet

a. Agents report
b. Certain standards of health and occupation
c. Minimum income requirement
d. All of the above

39. Which of the following factors would have the least effect on the premium charged for the life
insurance

a. Age c. Income
b. Occupation d. All of the above

40. Anti-selection occurs

a. When an agent thinks only of his own interest and not of his policyowners
b. When you purchase bad stocks with expectation that they will improve
c. When the insurance company accepts more than a share of poor risks
d. When persons in poor health wish to buy insurance

41. In insurance, risk means

a. Chances of you being paid by the company

b. Hazard on people’s lives
c. Chances of the beneficiary being paid
d. None of the above

42. In an application, the information that must be disclosed include

a. Only his date and place of birth

b. Only his family history
c. Every fact in his knowledge that is material to the insurance
d. Only information he wants the agent to know

43. Insurance companies have various sources of information and the insured. These are

a. Application Form c. Inspection Report

b. Medical Impairment Bureau d. All of the above

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44. In insurance, risks are classified as

a. Unacceptable and acceptable

b. Regular and irregular
c. Standard, substandard and declined
d. Complete and incomplete

45. A risk is considered substandard based on any or all of the following criteria

a. Death, occupation and moral character

b. Occupation, moral character and family health history
c. Income, educational attainment and occupation
d. Death, income and educational background

46. A hazardous occupation could be defined

a. An occupation the duties of which expose the insured to a degree of danger of

sustaining injury
b. An occupation in an 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

47. Statement in the application forms are

a. Guarantees c. Warranties
b. Representation d. None of the above

48. Mr. Roel Reyes has been confined in a hospital 3 years prior to his application for insurance.
He therefore needs to give the following information

a. Name of attending doctor, diagnosis, date of confinement

b. The bill and medicines
c. Name of doctor only
d. Date of confinement only

49. Insurance companies have a source of confidential medical information on applicants for life
insurance. This is the

a. Agent’s confidential report bureau

b. Inspection reports bureau
c. Financial standing bureau
d. Medical impairment bureau

50. An agent is filling up 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