AK_IC - MOCK EXAM SET B

1. Life insurance contributes directly to the welfare and progress of the country by

a. accumulating capital for investment in commerce and industry

b. partially relieving the community of the care of dependents
c. encouraging provisions for the future
d. all of the above

2. One supplementary benefit offered is a payors 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 of premium benefit in the event of death or disability of the person
paying the premium
c. allow the insurance company to pay the policys 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

3. A whole life policy with an initial premium rate that applies to the first 5 years of the policy and a
higher premium rate that applies to the remainder of the premium-payment period is known as

a. an extended life policy c. an experience-premium policy

b. a modified life policy d. a guaranteed renewable policy

4. 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

5. The only instance when a life insurance contract is treated primarily as an indemnity agreement is
when a

a. person insures the life of a friend

b. creditor insures the life of his debtor to protect himself
c. person insures the life of his or her spouse to protect against the loss of income earned by
the spouse
d. person in a partnership insures the life of his partner to protect the firm against loss due to
the death of that partner

6. Which of the following describes the convertible feature of a term insurance policy?

a. It may be changed to another term insurance policy without evidence of insurability

b. It may be changed for a guaranteed sum
c. It may be changed to another whole life policy
d. It may be changed to a permanent insurance without evidence of insurability

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7. A policy which permits the policyholder to vary the level of premium or the sum insured, and has its
cash values dependent upon investment performance and the level of premiums paid is known as a
(an) __________ policy.

a. participating whole life

b. term with advance premium deposit provision
c. annuity
d. universal life

8. A policy which affords coverage for two or more persons simultaneously with the face amount of the
policy payable when any of the insured dies at which time the policy terminates automatically is
known as a

a. Joint and Survivor Annuity c. Joint Life Policy

b. Double Duty Pesos Insurance d. Split Pesos Insurance Policy

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

a. dividends c. maturity benefits

b. cash values d. death benefits

10. Mr. Alvarez bought a P150,000 policy with a 20-year reducing term rider. He died 5 years after the
policy issue date. After his death, his wife received P150,000 and a monthly income thereafter for
15 years. This definitely has a

a. Family Maintenance Insurance

b. Family Income Rider
c. Straight Family Policy
d. Combination of whole life and level term insurance

11. 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

12. 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 rider

b. term insurance rider d. accidental death rider

13. A hazardous occupation could be defined as

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 condition exposing the insured to elements which
can cause sickness
c. an occupation which exposes the insured to social hazards
d. all of the above

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14. An agent fills out the Agents Confidential Report. What information must he put in his report?

a. information about insureds standing in the community

b. information about insureds finances
c. all information he knows which are material to the application for insurance
d. a & b only

15. Most life insurance agents are expressly authorized to perform the following functions:

a. solicit applications for insurance, accept the initial premium and issue a receipt on
behalf of the insurance company
b. solicit and approve the applications of the proposed insured
c. accept initial premium and waive the insurable interest requirement
d. Appraise the applicants and decide on a standard or sub-standard rating

16. An agent is prohibited from doing all of the following except:

a. alter an application without the applicants prior written approval.

b. convince a prospective client to cancel his policy in one insurance company in order to buy
a policy in the insurance company represented by the agent.
c. refund some of his commission to his client.
d. make complete comparisons of policies he sells and those offered by competing
insurance companies.

17. If a policyholder wants to get the maximum immediate value from his non-participating policy by
surrendering it, which of the following would he get?

a. cash value c. extended term Insurance

b. loan value d. accumulated dividends

18. The convertible feature of a term insurance policy provides that the policy may be

a. changed to a permanent insurance policy without evidence of insurability

b. changed to another life
c. cashed for a guaranteed sum
d. changed to permanent insurance with evidence of insurability

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

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

20. All of the following statements regarding a life insurance application are correct except:

a. misstatement of material facts could void the policy during the contestable period
b. it must be signed by the applicant
c. usually, it will be made part of the policy
d. statements made on the application are warranties

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21. Life insurance is

a. only available to a specific group c. a cooperative risk-sharing plan

b. a speculative risk d. paid-up insurance (reduced amount)

22. The guaranteed cash value is

a. the amount that the company will pay if the policy is surrendered
b. the amount that can be borrowed at any time
c. the paid-up value of the policy
d. the face amount

23. In a child insurance policy, the Parent Waiver Clause provides that:

a. if the father dies, the policy becomes reduced or paid-up

b. the premiums are waived if the father is disabled or dies
c. if the child becomes disabled, no further premiums are required
d. all premiums are refunded when the father reaches the age of 60.

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

a. to provide additional income to the government through license fees

b. to protect the public
c. to establish and maintain high professional and ethical standards
d. to give the government adequate control over the conduct of agents

25. The basic purpose of a conditional premium receipt is to acknowledge payment of the initial
payment of the premium for life insurance and to

a. eliminate the need for acceptance of the offer in forming the contract
b. provide insurance coverage earlier than the policy delivery date if certain
requirements are met
c. guarantee that a policy will be issued as applied for
d. backdate the policy to save age

26. The legal consideration for the promise made by the insurance company in a life insurance contract
is the

a. payment of renewal premium c. establishment of the reserve

b. approval by the underwriting d. payment of the initial premium

27. The Insurance Code specifies that a contract does not take effect unless

a. the policy is delivered to an insured, his assignee, agent, or beneficiary

b. payment of the first premium is made to the insurer or its authorized agent
c. no change has taken place in the insurability of the life to be insured between the time the
application was completed and the time the policy was delivered
d. the insured has named in the policy no fewer than two beneficiaries

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28. A living benefit in an insurance policy is

a. the guaranteed insurability benefit c. the waiver of premium for disability

b. the right to change beneficiaries d. the cash surrender value

29. Under the law pertaining to life insurance

a. only minor children can be named irrevocable beneficiaries

b. only the wife can be named irrevocable beneficiary
c. only the wife and the children can be named irrevocable beneficiaries
d. any person with insurable interest can be named irrevocable beneficiary

30. Insurable interest is necessary when a person insures another

a. so that the person being insured may be properly appraised

b. to establish that there is a genuine risk
c. because interest on premiums must be earned
d. to make sure that he will pay the premiums

31. 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

32. 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

33. When you bought an insurance policy on your wifes 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

34. Mr. Lorenzo and his primary beneficiary die in a common accident. It is established that the primary
beneficiary died ahead of Mr. Lorenzo and there are no contingent beneficiaries named. The
proceeds of Mr. Lorenzos life insurance policy will be paid to

a. the estate of the primary beneficiary

b. the estate of the insured
c. both the estates of the insured and the primary beneficiary on a 50/50 percent basis
d. a court of law

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35. Which of the following are requirements in reinstating a policy after it has lapsed for non-payment of
premiums?

a. Payment of all overdue premiums

b. Application for reinstatement within the specified time
c. Evidence of insurability and payment of interest on overdue premiums
d. all of the above

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

a. The grace period is usually 30 days

b. Cash is required for all premiums paid during the grace period
c. A premium is the legal consideration needed to effect a life insurance policy
d. Premiums which are paid quarterly or semi-annually are higher than those paid
monthly

37. An insured misstated his age by 3 years in the application indicating that he was younger than his
actual age. If he dies 10 months later, the insurance company will

a. pay the full face amount

b. not pay any of the benefits
c. refund the premium paid plus interest
d. pay the benefits that the premium would have purchased at the correct age

38. The grace period provision in life insurance policies is designed to

a. compel the insured to pay premiums more promptly

b. permit the company to extract extra charges
c. give the insured more time to pay the premium while coverage remains in force
d. terminate the contract of insurance automatically

39. In most cases, policy loan which has not been repaid at the time of the insureds death will be

a. charged to the person responsible for paying the debts of the insured
b. collected from the life insurance companys reserve
c. written off against the insurance company under the terms of the premium loan repayment
d. deducted from the proceeds of the policy when the death claim is paid

40. Mr. Jesus Gonzales carried a P500,000 whole life policy for 25 years, never borrowed from it, but
forgot to pay premiums before leaving for a four-month vacation to the USA. On his return trip, he
was killed in a plane crash. As his estate executor, you saw the lapse notice received from the
insurance company for this whole life policy. What action should you take?

a. None, since the policy has lapsed from non-payment of premium and benefits are not paid
b. Investigate to see if the insured elected Premium Loan as a non-forfeiture option
c. Apply for the face amount if the policy is to be paid to the beneficiary since coverage would
have been afforded under the extended term insurance non-forfeiture option
d. Apply for the cash value of the policy under the non-forfeiture option

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41. In personal accident and/or sickness contracts, blanket policies refer to

a. group insurance covering loss from specific hazards, incidental to or related to particular
activities
b. insurance covering all hazards
c. insurance for all types of hospital and health care expenses
d. none of the above

42. A man is about to retire. He has P100,000 which he wishes to use to provide income for himself as
long as he lives and which would continue to his wife as long as she lives after his death. You
would sell him a

a. retirement income endowment c. cash refund annuity

b. straight life annuity d. joint and survivorship annuity

43. All of the following statements about group insurance are true except:

a. each covered employee receives a policy

b. a covered employee who terminates his employment continues to be covered for 31 days
after termination date
c. in a noncontributory plan, 100% of the group members must be covered
d. most group policies pay dividends to employer

44. A client tells you that his bank wants him to use his life insurance policy so that his bank loan will be
paid off if he dies. You recommend that he

a. appoints an irrevocable beneficiary

b. makes an absolute assignment
c. makes a collateral assignment
d. none of the above

45. A policy that is in force for less than the original sum assured with no indebtedness has availed of

a. paid-up insurance option c. grace period

b. cancellation d. reinstatement provision

46. Anne Santos is designated as the irrevocable beneficiary of a policy owned by her father on his life.
Therefore, unless Anne consents, her father is not permitted to

a. elect a dividend option

b. make an effective assignment of the policy
c. change the frequency of the premium payments
d. discontinue the premium payments

47. A policyholder tells you that if he dies before his son reaches the age of majority he wants the life
insurance company to hold the sum insured until the son has reached the age of majority. Which of
the following would you recommend?

a. interest option c. fixed period option

b. fixed income option d. none of these

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48. Instead of taking a lump sum settlement under a policy, the insured or the beneficiary can elect to
take a

a. reinstated policy c. government bond

b. settlement option d. new single premium life insurance policy

49. When a policyholder has to pay his premium and interest which of the following has he availed of?

a. cash value c. extended term insurance

b. loan value d. accumulated dividend

50. All of the following are standard provisions of a life insurance policy except

a. misstatement of age clause c. an automatic premium loan clause

b. a grace period clause d. an entire contract clause

-end of Set B-

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