MOCK EXAM II : Insurance Institute for Asia and the Pacific

INSTRUCTION : Encircle the best answer.

1. An annuity plan

a. Offers life insurance protection

b. Offers the waiver of premium benefit
c. Is the same as an endowment plan
d. Is a purchase of an income

2. The person who purchases the annuity plan is called the

a. Assignor c. Insured
b. Owner d. Annuitant

3. A life insurance company earns income from two main sources

a. Premium income and investment income

b. Mortgage income and premium income
c. Dividend income and interest income
d. Mortgage income and dividend income

4. Policy reserves are future obligations on the part of

a. The Insurance Commission c. The Beneficiary

b. The Insurance Company d. The Policyowner

5. Insurance companies which are owned by the policyowners are examples of

a. Stock companies c. Family corporation

b. Mutual companies d. Open-end companies

6. Stock companies are owned by

a. Policyowners c. Creditors
b. Stockholders d. Government

7. In the case of the life insurance, a sale is considered completed if the application is signed
and payment of the first premium is made by the applicant. For the sale to be considered
completed

a. A medical examination has to be made first

b. Payment of the first premium has to be made by the applicant in full or in part, as
specified. One of the acceptable methods of settlement is by cash or check in part,
with a note for the balance
c. Payment of the first premium has to be made in full by a note first
d. The first premium has to be paid for in full and in cash

8. Why is it important that the application is the basis of the policy?

a. Because the completed application is the basis of the policy contract and the
company may accept or reject an application based on the information given in
the application
b. For the agent to have available data of his prospect in connection with future sales
c. To avoid the necessity of the insurer putting all relevant details in the contract
d. None of the above

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9. Which one of the following statements is correct?

a. Advertising by life insurance agents is prohibited

b. All information about a client or a prospective client has to be treated as
confidential
c. The agents should always recommend the amount and type of policy to a prospective
client which would be profitable for the company
d. When an agent advertises his services in the press, he is not allowed to state the
name of his company

10. All of the following statements regarding a life insurance application are correct except,

a. It must be signed by the applicant

b. Usually, it will be made part of the policy contract
c. Misstatements of materials facts could void the policy during the contestable period
d. Statements made on the applications are warranties

11. Prior to granting a license, the IC requires proof of

a. A clean record of employment

b. A reasonable educational background
c. A prospective agent’s character and reputation
d. All of the above

12. The IC has the power to adjudicate insurance claims against insurance companies for any
single claim not exceeding

a. P 1,000,000
b. P 250,000
c. P 100,000
d. P 500,000

13. Which one of the following statements is correct?

a. An insurance agent’s license will be renewed when the Commissioner is satisfied that
the information in the application is accurate and all requirements are met
b. An insurance agent’s license is valid only for one month
c. An insurance agent’s license is valid during the lifetime of the agent
d. An insurance agent’s license will be renewed when the corresponding application and
fee are received by the Insurance Commissioner.

14. The insurance industry in under government regulations because

a. It is required to account for money spent in company operations

b. It pays high taxes
c. It affects public interest
d. It is a charitable institution

15. Which one of the following statements is correct?

a. An agent is allowed to share commissions when selling a whole life policy but not
when selling a term policy
b. An agent is allowed to share commissions with another licensed agent or
agents but with no one else
c. Sharing the commission with any other person is called twisting
d. An agent is not allowed to share commissions with any person

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16. Which one of the following statements is correct?

a. Rebating of premiums can only be authorized by the head office of the insurer
b. A life insurance is not allowed to identify on his letterhead the name of the insurer he
represents
c. Life insurance agents are allowed to act for two insurers at the same time under the
same license
d. Rebating of premiums by an insurance agent is prohibited

17. Persuading a policyowner, directly or indirectly, to surrender or lapse a policy in one company
and replacing it with a policy in another company is

a. Rebating
b. Twisting
c. Knocking
d. Discounting

18. Rebating is

a. Dating the policy a month in advance

b. Giving false information
c. Twisting
d. Premium discrimination against policyholders

19. An insurance agent’s license can be revoked for

a. Fraudulent practices
b. Violation of any provision of the Insurance Code
c. Misrepresentation in the application for license
d. Any or all of the above

20. One example covered under the ethical practices and procedures is

a. Keep all policyholders information confidential

b. Always recommend a will
c. Never drink in front of the client
d. Always pick up the first premium with the application for insurance

21. The term knocking means

a. Promising to pay to two annuitants a fixed annual income as long as both survive
b. Making derogatory remarks about competing underwriters or companies
c. The number of years that person at a given age will live on the average as shown by
the mortality table
d. None of the above

22. The following are unethical practices in the solicitation and procurement of insurance except

a. Misleading estimates of the dividends or shares of surplus to be received thereon

b. Inducing a policyholder to lapse, forfeit or surrender a policy he holds for another
company
c. Misrepresenting the terms of any policy issued by any insurance company or the
benefits or advantages promised thereon
d. Obtaining or attempting to obtain a license by fraud or misrepresentation

23. Twisting is

a. Paying the premium on one policy by surrendering the dividends of another policy
b. The replacement of a policy in one company with another policy in another company
c. An attempt made by an insurance company to secure the services of an agent from another
company
d. An offense which does not apply to variable concepts
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24. The misstatement of facts by either of the parties of insurance to the other whether in writing
or orally preliminary and in reference to making the insurance contract is

a. Knocking
b. Overloading
c. Misrepresentation
d. Twisting

25. Selling a person more insurance than what is warranted by his sources is called

a. Overloading
b. Twisting
c. Rebating
d. Knocking

26. 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

27. Inducing an insured to lapse or forfeit his insurance

a. Is not allowed by the conditions of the contract

b. Is always to the advantage of the policyholder
c. Is an offense in the great majority of cases
d. Is a matter left entirely to the discretion of the agent

28. The suicide clause is in effect for

a. The first 6 months

b. The first year
c. The first 2 years
d. The first 18 months

29. The three non-forfeiture values in a permanent policy are

a. Cash dividends, bonus additions, and extended term insurance

b. Cash surrender value, loan value, assignment
c. Waiver of premium, reinstatement and the policy loan
d. Cash surrender value, paid value, extended term insurance
30. In the event that a policy elects the paid-up insurance option

a. The premiums stop and the policy continues for the full face amount until age 65
b. The premium 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 policy will automatically terminate

31. What are the basic settlement options?

a. Cash surrender value, automatic premium loan

b. Fixed amount, fixed period, interest fixed period and for life
c. Double indemnity, total disability, waiver of premium
d. Policy loans, assignment, beneficiary designation

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32. In case of misstatement of age

a. The policy is cancelled and a new one is issued for the correct age
b. The insured can be changed
c. The amount of insurance is adjusted to the amount which the premium paid at
the correct age would have purchased
d. The policy remains in force and the company cannot contest it

33. Which of the following is a settlement option?

a. Policy loan
b. Cash surrender value
c. Extended term insurance
d. Interest on insurance proceeds

34. Name the provision in a permanent life insurance policy under which, if the premiums are
discontinued, full insurance coverage will be maintained for a specific period

a. Extended term insurance

b. Paid-up insurance
c. Paid-up additions
d. Life income option

35. Which one of the following is not derived from the non-forfeiture values

a. Cash surrender value

b. Paid-up insurance
c. Dividends
d. Extended term insurance

36. Mr. Dela Cruz stated in his application that he was 30 years of age and a policy was issued to
him on that basis. When he died twenty years later, it was found out that, in fact, he was 34
years of age at the time of his application. In conformity with the Insurance Code, the
company

a. Paid the amount of insurance payable to his beneficiary reduced in relation to

his actual age at the time the contract was signed
b. Paid one-half of the face value of the policy
c. Need not pay the face value of the policy, but refund all premiums paid
d. Paid the full face value of the policy without any extra charges

37. In the event that the policyowner elects the paid-up insurance option

a. Premiums stop and the policy continues for a full face amount until age 65
b. Premium cease and protection continues for a reduced amount
c. Insurance continues at a reduced amount and with reduced premium
d. The policy will automatically terminate

38. If a policyowner commits suicide within one year, what’s the company’s liability?

a. The company is not liable at all

b. The company would be liable for the payment of the face value of the policy
c. The company would be liable for the payment of the premiums paid by the
insured only
d. None of the above

39. Which of the non-forfeiture option gives the largest amount of protection?

a. Fully paid insurance

b. Cash surrender value
c. Extended term insurance
d. All of the above give equal protection
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40. Any policy which has lapsed can be reinstated subject to normal conditions of proof of
insurability within

a. Three years
b. Six months
c. One year
d. Two years

41. Life insurance is

a. A luxury afforded by the rich

b. Only available to a specific group
c. A cooperative-risk sharing plan
d. A speculative risk

42. The official who makes the necessary assumption and calculation in respect of the principal
elements in life insurance premium in order to arrive at the premium rates to be charged is the

a. Life agent
b. Senior statistician
c. Insurance Commissioner
d. Actuary

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

a. A comprehensive inspection report

b. Certain standards of health and occupation
c. A satisfactory medical examination
d. A minimum income figure

44. The fundamental advantage of the use of insurance as means of meeting economic losses is
that through insurance, these losses are

a. Spread over a large number of people

b. Deferred for a specific period of time
c. Reduced for the group as a whole through the multiplier effect
d. Met as they arise through savings accumulated on an assessment basis

45. The term loading means

a. The difference between the gross and net premium for the purpose of paying
the insurance overhead expenses including commissions and taxes
b. The amount which the company will lend to the policyholder with the policy as a
security
c. The amount payable in the event of the occurrence of a loss which renders him unfit
for insurance
d. None of the above
46. 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 the dependents
c. Encouraging provisions for the future
d. All of the above

47. Life insurance can provide money when income stops because of

a. Disability
b. Death
c. Retirement
d. All of the above

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48. The three elements that make up a life insurance premium are

a. Mortality expense, investment earnings, and operating expenses

b. Cash values, dividends and paid up values
c. Cash values, loan values and paid up values
d. Past dividend experience, present dividend and projected interest

49. The number of years that persons at a given age will live on the average as shown by the
mortality table is called

a. Law of large numbers

b. Life income option
c. Life annuity
d. Life expectancy

50. Part of the premium paid by a policyholder is invested by the insurance company. In premium
computation, this factor is known as

a. Interest
b. Investment
c. Loading
d. Mortality