M9 Flashcards
1
Q
Which principle in insurance states that the financial position of an insured is to be restored approximately to the position that existed immediately prior to the occurrence of the loss?
A
The principle of indemnity
2
Q
Medical Expense Insurance is also known as?
A
It is also known as Hospital and Surgical Insurance.
3
Q
Life insurance can also be bought to…
A
… serve investment needs.
4
Q
The likelihood that a person may act dishonestly in an insurance transaction is known as:
A
Moral hazard
5
Q
The use of insurance in dealing with risks is to…
A
transfer risk to another party.
6
Q
Which organisation provides an affordable and accessible one-stop avenue for consumers to resolve their disputes with financial institutions?
A
Financial Industry Disputes Resolution Centre.
7
Q
Before a risk can be potentially insurable, it must be:
A
A pure risk
8
Q
Mortality rates are computed by DIVIDING the number of:
A
deaths by the total number of people of that age.
9
Q
Premiums of life insurance policies are calculated by:
A
Actuaries
10
Q
Life insurance products can be classified by the:
A
statutory insurance fund
11
Q
Which insurance product protects the insured against being unable to perform a specific number of Activities of Daily Living ADLs?
A
Long-Term Care Insurance policy
12
Q
Recurrent single premium policies are commonly bought through…
A
CPF savings
13
Q
In general, Joint Life policies can be applied for by two or more individuals, as long as…
A
insurable interest is present.
14
Q
Jonah wishes to buy a Life Insurance policy which allows him to :
- obtain high permanent protection cover for his dependants
- accumulate a savings fund to supplement his retirement income
- pay a fixed amount of premiums until his death
Which type of policy should Jonah buy?
A
Ordinary Whole Life Insurance
15
Q
The cash value of a Whole Life Insurance policy…
A
belongs to the policy owner who may use it as a savings vehicle.
16
Q
An Ordinary Whole Life Insurance policy is suitable for clients who:
A
wish to provide financial protection for their dependants
17
Q
Jane has just started working. She is currently healthy and supporting her aged parents. She wishes to buy a Life Insurance policy to provide coverage for a short-term basis until she can afford the premiums to buy a more permanent Life Insurance policy.
Which policy should Jane buy?
A
Term Insurance with renewable option
18
Q
Jenny bought a Life Insurance policy with the following characteristics:
- It has no cash value.
- It has no policy loan feature.
- The policy lapses or ceases if the premium is not paid within the grace period.
Which type of Life Insurance policy did Jenny buy?
A
Term insurance
19
Q
Which policy can be offered either as a participating or a non-participating policy?
A
Whole Life Insurance.
20
Q
What option allows a policy owner to use cash values under specific types of life insurance policies if he is unable to pay the premiums due on his policy?
A
Non-forfeiture option
21
Q
Riders cannot be dropped by the insurer as long as
A
… premiums are paid when due.
22
Q
Which rider provides that, if the parent who is paying the premiums on the juvenile policy dies, the insurer will waive all future premiums until the child reaches the specified age?
A
Payor Benefit Rider.
23
Q
The waiver of premium rider can be issued automatically to the policy owner who has been granted a
A
Life Insurance policy.
24
Q
Your client, who is a doctor, wishes to attach a Critical Illness Rider to her Whole Life Insurance policy. What requirement would there be?
A
There is a waiting period that must be met before benefits can be paid out.
25
A 100% Acceleration Benefit Critical Illness rider:
provides for the pre-payment of the full sum assured of the basic policy to which it is attached
26
The term of the Additional Benefit Critical Illness rider of one’s policy can be shorter than that of the main policy.
True or False
True
The term of the Additional Benefit Critical Illness rider of one’s policy CAN be shorter than that of the main policy.
27
The bonus that is in the form of an addition to the sum assured, irrespective of the age of the insured, or the period that the policy has been in force, is known as the:
reversionary bonus
28
Under Notice No: MAS 320, insurers are expected to put in place an Internal Governance Policy that is approved by its:
Board of Directors
29
The "free-look" provision can be found in:
Product Summary
30
A client buying a participating life insurance policy wishes to find out about the total cost of distribution that the insurer expects to incur in relation to his policy, including the cost of any financial advice provided to him. He can find the details from:
a Policy Illustration of his policy
31
"Your Guide to Participating Policies" is an initiative of the:
MoneySENSE Programme
32
Both the client and the Financial Adviser (FA) Representative need to sign on every page of the "Policy Illustration".
True or False
True.
Both the client and the Financial Adviser (FA) Representative need to sign on EVERY page of the "Policy Illustration".
33
An "Annual Bonus Update" is a COMPULSORY document that must be sent annually as a post-sales disclosure requirement for Participating Life Insurance policies.
True or False?
True.
An "Annual Bonus Update" is a COMPULSORY document that must be sent annually as a post-sales disclosure requirement for Participating Life Insurance policies.
34
Fees and charges for an Investment-linked Life Insurance policy are paid through:
Sale of purchased units
35
Your client wishes to know the amount of his Investment-linked Life Insurance premium that is used to purchase units. Where can he find the information he seeks?
Product Summary
36
What is a benefit of investing in Investment-linked Life Insurance policies?
It is guaranteed insurability for the duration of the policy.
37
Your client is deciding between a traditional Participating Life Insurance Policy and an Investment-linked Life Insurance Policy (ILP). Both types of policies are designed to provide lifetime coverage.
True or False?
True.
Both a traditional Participating Life Insurance Policy and an Investment-linked Life Insurance Policy (ILP) are designed to provide lifetime coverage.
38
An ILP is suitable for clients looking for guaranteed investment returns.
True or False?
False.
39
A regular premium ILP is suitable for clients looking to manage the fund by themselves.
True or False?
False.
40
A regular premium ILP is suitable for retirees with no regular source of income.
True or False?
False.
41
An ILP is suitable for clients seeking flexibility in premium payments.
True or False?
True.
42
Regarding the pricing of Investment-linked Life Insurance policy (ILP) units, there is no difference between a single-pricing concept and a bid-offer pricing concept.
True or False?
False.
43
Regarding the pricing of Investment-linked Life Insurance policy (ILP) units, the bid price is the price which the insurer uses to allocate units to a policy when premiums are paid.
True or False?
False.
44
Regarding the pricing of Investment-linked Life Insurance policy (ILP) units, 100% of the premiums are allocated to purchase units from the start under a back-end loaded plan.
True or False?
True.
Under a back-end loaded plan, 100% of the premiums are allocated to purchase units from the start.
45
Regarding the pricing of Investment-linked Life Insurance policy (ILP) units, the Premium Allocation Rate is known only to the life insurer and is not disclosed to the policy owner.
True or False?
False.
The Premium Allocation Rate is known to the life insurer and disclosed to the policy owner.
46
The small investor can access the sub-fund with a modest capital with an ILP.
True or False?
True.
47
Which fund combine equity investments with fixed interest instruments?
Balanced funds combine equity investments with fixed interest instruments.
48
Which funds are primarily invested in company stocks with the general aim of capital appreciation?
Equity funds.
49
Which risk category do Geographically Specialised Funds generally fall under?
High risk
50
A pre-set mix of funds based on an investor's risk profile is called a:
Portfolio
51
Investment-linked sub funds-
Managed Portfolios come with a pre-set mix of funds.
True or False?
True.
52
Investment-linked sub funds-
Cash funds are also known as Sector Funds.
True or False?
False
53
Investment-linked sub-funds-
Managed Funds are also known as Sector Funds.
True or False?
False.
54
Investment-linked sub-funds-
Capital Guaranteed Funds are commonly open-ended funds.
True or False?
False.
55
Which risk category do Balanced Funds (equity investments combined with fixed interest instruments) generally fall under?
Medium risk
56
Equity Funds (primarily invested in company stocks) generally carry which level of investment risks?
Medium to high
57
Amanda decides to carry out a top-up of S$15,000 to her existing Investment-linked Life Insurance policy.
Based on the information below, calculate the total number of units after the top-up.
Assume that fees are deducted AFTER units have been allocated.
```
Offer Price = S$2.00
Bid offer spread = 3%
Top-up fee = S$50
Administrative Charge (with mortality charge) for top-up = 2% of top-up premium
Existing number of units = 8,000 units
```
Bid Price = S$2 x 0.97 = S$1.94
Number of additional units purchased after
the top-up
= top up/offer price = S$15,000/2 = 7,500 units
Administrative Charge for top-up
= 2% x S$15,000 = S$300
Total charge for top-up = 300 + 50 = S$350
Number of units to be cancelled
= total charge/bid price
= 350/1.94 = 180.41 units
Number of unit allocated after deduction
of charges
= 7,500-180.41 = 7,319.59 units
Total number of units = 8,000 + 7,319.59
= 15,319.59
= 15,320 units
58
The policy owner has an existing Investment-linked Life Insurance policy with the following details:
Total number of units = 8,500
Bid price = S$2.50
If the policy owner wishes to do a partial withdrawal of S$2,000 from the policy, calculate the number of units to be sold.
Withdrawal Benefit
= withdrawal amount / bid price
= S$2,000/2.50
= 800 units
59
The bank is offering a promotional rate of 1.50% p.a. for nine months on fixed deposits. Mary decided to place S$50,000 with this bank.
Using the Basic Time-Value Formula, calculate how much interest Mary will receive at the end of nine months.
FV = PV x (1+i)n
```
FV=S$50,000 x (1+1.5%)^9/12
FV= S$50,000 x (1+0.0150)^9/12
FV= S$50,000 x (1.015)^0.75
FV = S$50,000 x 1.01
FV= S$50,500
Interest = S$50,500 - S$50,000 = S$500
```
60
Compute the return on gross premium per annum of a single premium of S$80,000 at the end of six years. Assume that the surrender value of the single premium Investment-linked Life Insurance policy is S$85,000 at the end of the six-year period. You are required to use the interest factor provided.
Initial Single Premium (1+i)^n = Cash value in n year
80,000(1+i)^6 = 85,000
(1+i)^6 = 1.0625
Using the future value interest factor table,
the closest factor is 1.0615. Hence, the interest
rate is close to 1% per annum.
61
An Investment-Linked policy has the following features:
Death Benefit = Value of the unit + Sum Assured
Sum Assured = S$200,000
Annual Cost of Life Cover = S$1.50 per S$1,000
Calculate the monthly mortality charge.
Monthly Mortality Charge
= Annual cost of life cover/12 x sum assured
= [(S$1.50/1,000)/12] x 200,000 = S$25
62
The client wishes to surrender an Investment-linked Life Insurance policy with the following features:
Death benefit = S$100,000
Number of units = 10,150
Current offer price = S$2.40
Bid-offer spread is 5% throughout.
Calculate the surrender value.
Bid price = 2.40 x 0.95 = S$2.28
Surrender value = 10,150 units x S$2.28
= S$23,142
63
A loan amount of S$50,000 has been borrowed from the bank at a 30% nominal annual interest. However, the bank has stated that the interest is payable twice a year, and that it is compounded.
Calculate the effective interest rate of this loan.
32.3%
64
Annuities can only be paid with single premiums.
True or False?
False.
Annuities can be paid with regular and single premiums.
65
Annuities provide protection against someone dying too soon.
True or False?
False.
Annuities provide protection against one outliving his/her resources (i.e. living longer than expected).
66
Annuities cannot be purchased using the CPF Minimum Sum.
True or False?
False.
Annuities can be purchased using the CPF Minimum Sum.
67
Annuities cannot be used to provide for major illness protection.
True or False?
True.
68
What is a benefit of annuities?
Annuities provide guaranteed income.
69
Which annuity guarantees a minimum number of payments (irrespective of whether the annuitant is alive to receive them), or a refund of some of the consideration in the event of the annuitant's premature death?
Guaranteed Minimum Payout Annuity.
70
Which document gives the history of any illness that the proposed life insured has suffered or is still suffering from?
An Attending Physician's Report.
71
The main purpose of life insurance underwriting is to:
ensure that the premiums charged correspond closely with the risk that each proposer presents.
72
The proposal form for a Life Insurance has a section for undischarged bankrupts to complete their details.
True or False?
False.
73
The proposal form for a Life Insurance must contain a section on "declaration of and replacement of existing policy(ies)".
True or False?
True.
74
Failure to disclose material facts in a proposal form for Life Insurance may give the insurer the right to void the policy.
True or False?
True
75
When the life insurer accepts risks with a lien (reduced sum assured for a certain period), the proposer needs to start paying his premiums only AFTER the lien period.
True or False?
False.
76
For risks that are accepted at ordinary premium rates, they must be standard risks to the life insurer.
True or False?
True.
77
Insurers are required under Section 25(5) of the Insurance Act Cap. (142) to display a warning statement prominently in the proposal form to highlight to the proposer the:
importance of disclosing accurately all facts which he knows or ought to know.
78
A client wishes to surrender his life insurance policy owing to financial hardship. The client’s financial adviser should advise his client to:
consider converting to a paid-up policy.
79
To reinstate a lapsed Life Insurance policy, the policy owner will:
- need to show evidence of continued good health
- need to pay all the arrears of premiums with interest
- be subject to the incontestability and suicide clauses again
80
Premiums can be paid by Banker's Orders.
True or False?
True
81
Single and recurrent single premiums can be funded via Supplementary Retirement Scheme SRS savings.
True or False?
True
82
Once the frequency of premium payment has been chosen, the policy owner will not be allowed to change it.
True or False?
False.
83
Premiums can be paid after the grace period in the initial years, without concern that the policy will lapse.
True or False?
False.
84
If the policy loan under a life insurance exceeds the cash value of the policy, the insurer will terminate the policy without refunding any premiums paid.
True or False?
True
85
What is the requirement if your client has lost his Life Insurance policy and would like to ask for a duplicate copy?
He must provide an indemnity to the insurer.
86
Upon the insurer's receipt of a new proposal form with the cash premium payment, the issuing of the conditional premium deposit receipt will bind the insurer to grant conditional cover only for which one of the following conditions, before the official acceptance of the proposal by the insurer?
Accidental Death.
87
When a life insured passes away, the Financial Adviser Representative should advise the life insurer as soon as he is aware of it.
True or False?
True.
88
The life insurer can make payment of a policy claim only in one lump sum.
True or False?
False.
89
To meet a death claim, the life insurer needs to sight only the original policy contract.
True or False?
False.
90
It is not important for the life insurer to find out who is entitled to receive the policy payments, as long as there is proof of death.
True or False?
False.
91
Proper claimants under Section 61 (12) of the Insurance Act (Cap. 142) refer to persons who are entitled to the policy monies.
Which one of the following persons falls within the category of "proper claimants"?
The deceased’s uncles.
The deceased’s cousins.
The deceased’s nephews.
The deceased’s grandparents.
The deceased’s nephews.
92
When making a death claim owing to natural causes under a Life Insurance policy, the insurer will require the claimant to submit:
claimant's statement.
93
A person may disappear, and the family may want to make a claim under his policy. The claimant may apply for a court order to pronounce the person dead, if he has disappeared without trace for at least how many years?
7 years.
94
One of the documents required to support a death claim is proof of age.
True or False?
True.
95
What arises when an insurance professional creates the impression that a certain fact exists when it does not, and an innocent third party relies on that impression and suffers damage as a result?
The doctrine of estoppel.
The basic concept of an estoppel is that where a person (A) has caused another (B) to act on the basis of a particular state of affairs, A is prevented from going back on the words or conduct which led B to act on that basis, if certain conditions are satisfied.
96
Which section of an insurance contract usually contains details of the policy owner and life insured, as well as the insurance coverage?
Policy Schedule.
97
If death occurs after the grace period, no interest is charged on the overdue premium.
True or False?
False.
98
If the premium is paid within the grace period, no interest is charged.
True or False?
True.
99
If death occurs within the grace period, nothing is payable by the insurer.
True or False?
False.
100
If the premium is paid after the grace period, the policy will lapse even if the policy has accumulated a cash value.
True or False?
False.
101
The Grace Period provision provides for the policy owner to continue to enjoy insurance cover during the grace period, although he has not paid up his premiums.
True or False?
True.
102
The Suicide provision states that as long as death is by suicide, regardless of when it happens, the policy will be rendered void.
True or False?
False. Only within the first 2 years, not regardless of when.
Suicide Provision — a provision found in most life insurance policies that provides that, if the covered individual dies as a result of suicide within 2 years of the policy issued date, the policy will not pay the death benefit.
103
Under which contract does a party has the right to do away with his obligations, without incurring legal liability?
Voidable contract
104
Under which clause does the insurer undertakes not to dispute the validity of a Life Insurance contract and void it, after the policy has been in force for a specified period of time, with the exception of fraud?
Incontestability
105
According to Section 60(2) of the Insurance Act (Cap.142), a life insurance policy which has been in force for a minimum of _________ year(s) shall not lapse if the insured does not pay his premiums.
3 years
106
Life agents are deemed to be "representatives" under the:
Financial Advisers Act (Cap. 110)
107
An agent's express authority is determined by the terms of the agency contract which he has signed with his principal upon his appointment as the representative.
True or False?
True.
108
An effective ratification binds the principal to the same extent as if the agent has express authority to act.
True or False?
True.
109
When a principal allows another person to appear as if he is his agent, when in fact he is not, this is an example of:
apparent authority.
110
The parties to an agency agreement may terminate the agency by way of a/an:
revocation by the principal.
111
Frequency of premium payments is one of the factors affecting the pricing of Life Insurance premiums.
True or False?
True.
112
A Whole Life Insurance policy is suitable for individuals who seek:
to accumulate a savings fund for general purposes
113
What are cash funds?
They are also known as Money Market Funds.
114
Bernard has an existing Investment-linked Life Insurance policy which allows him to make partial withdrawals at any time, subject to the minimum balance required to be maintained.
```
The details of the policy are as follows:
Existing number of units = 18,000
Offer Price = S$2.00
Withdrawal Amount = S$2,000
Bid-offer spread: 5% throughout
```
Calculate the remaining number of units after the withdrawal.
Bid price
= S$2 x 0.95 = S$1.90
Withdrawal Benefit
= Withdrawal Amount / Bid Price
= S$2,000 / S$1.90
= 1,052.63 units
Number of remaining units after withdrawal
= 18,000 - 1,052.63 units
= 16,947.37
= 16,947 units
115
Annuities are categorised based on when the annuity payments begin.
True or False?
True
116
Benefit riders can be attached to annuities.
True or False?
False.
117
Annuities can be purchased using CPF savings.
True or false?
True.
118
Assignees may re-assign their Life Insurance policies, subject to the same rules and laws of assignment.
True or false?
True
119
Assignments of life insurance policies can take place by gifts.
True or False?
True
120
Individuals who believe that they have a greater-than-average likelihood of loss tend to seek insurance protection to a greater extent than those who believe that they have an average or less-than-average likelihood of loss.
This tendency is called:
Anti-selection
121
At each year-end, which party will conduct a detailed analysis of the performance of the participating fund and make recommendations of the amount of bonuses to be allocated?
The Appointed Actuary
122
Based on the information below, calculate the number of units purchased on a regular premium Investment-linked Life Insurance policy at the beginning of the fourth year.
Assume that fees are deducted AFTER units have been allocated.
```
Offer Price (Year 1) = S$1.50
Growth Rate = 5% per annum
Regular Premium = S$2,400 per annum
Allocation rate (Year 4) = 80%
Bid offer spread = 3%
Number of units remaining (end of Year 3) = 470 units
Sum Assured = S$150,000
```
Offer price at beginning of Year 4 (i.e end of year 3)
= S$1.50 x 1.053
=1.50x1.16 = S$1.74
Number of units purchased
= (80% x S$2,400) / 1.74 = 1,103.45 units
123
For an annuity, the period of time between the first (or single premium) being paid and the time that the payments to the annuitant starts is known as the:
Accumulation period
124
The Declaration section of a life insurance proposal form can serve what purpose?
The Declaration section of the proposal form may serve as an authorisation from the proposer for the insurer to obtain their medical history from any medical source.
125
Upon the insurer's receipt of a new proposal form with the cash premium payment, the issuing of the conditional premium deposit receipt will bind the insurer to grant conditional cover only for which condition, before the official acceptance of the proposal by the insurer?
Accidental Death.
126
What document does the insurer need in order to settle a maturity claim under a life insurance policy
Discharge voucher signed by the claimant
127
An agency may be terminated by:
unsoundness of mind of either party
128
Before an insurer can ratify an unauthorised act, the ratification must:
occur within a reasonable timeframe
129
CPF relief is not available for voluntary contributions that are made in excess of the compulsory contributions under the CPF Act.
True or False?
True.
130
Policies under Section 73 of the Conveyancing and Law of Property Act ______________
are a statutory trust, created automatically in favour of his spouse and/or children as
beneficiaries
131
Your client stated that he is 30 years old instead of 35 years old in the proposal form. What
will the insurer do?
Understatement of age-
Reduce sum assured
132
Life Insured stated that he is 45 instead of 35 years old in the application form. What can the
insurer do?
Overstatement of age-
Refund excess premium without interest
133
A party made an offer to another party. This party then accepts the offer conditionally. This
conditional offer is called…
Counter offer
134
What are attached to the policy to make up the Entire Contract?
Proposal form, policy contract, endorsement.
135
Acting on behalf of an “incapacitated party” is known as ____________.
Agent of necessity
136
What is the withholding tax imposed on withdrawals by foreigners who are not Singapore tax
residents under the Supplementary Retirement Scheme (SRS)?
20%
137
Which kind of policy, insurable interest needs to be proven at the time of loss?
Travel insurance
138
For revocable nominations by Muslim policy owners, they are subject to “Faraid”.
True or False?
True
139
Which kind of policy, insurable interest needs to be proven at the time of loss?
Travel insurance
140
For policy loans, the insurance interest accrues on a ________ basis?
Daily.
141
According to the rules of contract law, statements made by the parties when they enter into a contract are classified as ________?
Either warranties or representations
142
What structure of investment-linked sub-funds is the investment income put back into the fund?
Accumulation struxtures
143
In Singapore, under section 76 of the Bankruptcy Act (Cap. 20), all divisible property of the bankrupt will vest in the ______.
Official assignee
