PRU TRAD MOCK EXAM

Question 1

1. Both endowment and term life policies provide that
   a. No cash value is available to the policy owner during the term of the policy
   b. Renewal and conversion privileges are available
   c. A benefit will be paid at the end of the period of coverage if the person is
   then alive
   d. Insurance protection will be limited to a specified period

Answer 1

D

Question 2

2. Indicate which of the following is not a function of an application for life
   insurance policy.
   a. To give details pertaining to non-forfeiture options
   b. To furnish information on which the contract of life insurance may be
   written
   c. To furnish initial information as to insurability
   d. To convey to the company the desire of the applicant to obtain insurance

Answer 2

A

Question 3

3. A father has his present life insurance payable to his estate and because he has
   now retired he wants to pass the policy on to his son who will assume the premium
   payments. Which of the following will he have to appoint his son to achieve his
   desire and protect the son from Estate Tax Liability?
   a. Irrevocable primary beneficiary
   b. Absolute assignee
   c. Irrevocable secondary beneficiary
   d. Revocable primary beneficiary

Answer 3

A

Question 4

4. A policy where an irrevocable beneficiary has been designated the insured, without the beneficiary’s permission, can
   a. Avail of a non-forfeiture option
   b. Discontinue premium payments
   c. Borrow minimal cash loan
   d. Alter the dividend option now in effect

Answer 4

B

Question 5

5. What are the basic settlement options?
   a. Policy loan, guaranteed insurability
   b. Cash surrender value, automatic premium loan
   c. Fixed amount, fixed period, life income, interest on deposit
   d. Double indemnity, total and permanent disability waiver

Answer 5

C.

Question 6

6. An insurance company generally has the right to rescind a life insurance policy if
   a. Company discovers at any time that the policy owner was actually a minor
   at the time of application
   b. Insured person intentionally kills himself during the suicide exclusion
   period specified in the policy
   c. Insured person is killed in military action during the contestable period of
   the policy
   d. Company discovers during the contestable period that the application
   contains a material statement.

Answer 6

A

Question 7

7. Which of the following is the least important reason for requiring that insurance agents be licensed?
   a. To establish and maintain high professional and ethical standards
   b. To protect the public
   c. To give the government adequate control over the conduct of agents
   d. To provide additional income to the government through license fees

Answer 7

D

Question 8

8. In the event that a policy owner elects the paid-up insurance option
   a. The premiums stop and the policy continues for the full face amountuntil age 65
   b. The insurance continues at a reduced amount and with a reduced premium
   c. The policy will automatically terminate
   d. The premiums cease and protection continues with a reduced amount of Coverage

Answer 8

D

Question 9

9. The company will allow a policy change from a higher premium to a lower premium provided the insured
   a. Buys a new plan altogether
   b. Presents satisfactory evidence of insurability
   c. Momentarily assigns the policy to the company
   d. Obtains written consent from his or her spouse

Answer 9

B

Question 10

10. A policy which permits the policyholder to vary the level of premiums, the sum insured and has its cash values dependent upon the investment performance and the level of premium paid is known as __________ policy
    a. Participating whole life policy
    b. Participating endowment
    c. Universal life
    d. None of the above

Answer 10

C

Question 11

11. Which of the following statements about “ Disability Waiver of Premium Rider” is false?
    a. Disability must occur before a stated date
    b. The insured has to die while disabled
    c. There is a waiting period
    d. It has to be attached to a life insurance policy

Answer 11

B

Question 12

12. In most life insurance applications, the largest amount of information requested is data which
    a. Identifies the applicant
    b. Describes the type of insurance applied for
    c. Relates to the insurability of the applicant
    d. Describes the desired benefits and mode of payment

Answer 12

C

Question 13

13. Paid-up additions
    a. Affect both cash and loan value of the policy
    b. Don’t affect the cash value of the policy
    c. Don’t affect the loan or cash value of the policy
    d. Only affect the cash value of the policy

Answer 13

A

Question 14

14. The total life coverage of a permanent basic policy can be greatly increased through the use of
    a. An accidental death benefit rider
    b. An interim term rider
    c. A supplemental term rider
    d. None of the above

Answer 14

C

Question 15

15. Life insurance companies make use of the laws of probability in order to
    a. Estimate future death rates among members of a given group
    b. Predict when an individual insured will die
    c. Develop statistics of past deaths among the general population
    d. Determine the experienced death rate among the insured persons

Answer 15

A

Question 16

16. In the case of renewable term insurance, the policy owner may
    a. Renew the coverage based on a higher premium
    b. Change the life insured at renewal date
    c. Renew providing the insurance company agrees to continue coverage
    d. Renew at the same premium for further period of years

Answer 16

A

Question 17

17. A man applied for a Ps. 20,000 whole life policy and paid the full initial premium to the soliciting agent. The agent issued a binding receipt. Under such a receipt, the insurance company
    a. Offers permanent insurance coverage effective as of the date of the application
    b. Promises that the insurance coverage will become effective as of the date the application is approved
    c. Guarantees the policy will be issued as applied for
    d. Immediately provides interim insurance that remains in effect until the policy is issued or the application is declined

Answer 17

D

Question 18

18. Endowment life insurance and term life insurance are similar in that both plans
    a. Build up cash value rapidly in the early policy years
    b. Provide for payment of the face amount if the insured is alive at the end of the specified period
    c. Provide life insurance protection for only the period of time specified in the policy contract
    d. Contain provisions for automatic continuation of the insurance protection at the end of a specified period

Answer 18

C

Question 19

19. An agent who determines a prospect’s complete financial requirements preparatory to offering him a policy using the correct selling approach knows as
    a. Counselor selling
    b. Total needs selling
    c. Planned selling
    d. Multiple products selling

Answer 19

B

Question 20

20. Name the provision in a permanent life insurance policy under which premiums are discontinued, full insurance will be maintained for a specified period:
    a. Extended term insurance
    b. Paid-up insurance additions
    c. Life income option pension
    d. Reduced paid-up insurance

Answer 20

A

Question 21

21. Notwithstanding various possible legal impediments, if the owner of an endowment at age 65 policy tells you that the maturity of the policy he wants to provide his church with a monthly donation for as long as the church exists.
    which option do you recommend?
    a. Fixed income option
    b. Periodic annuity option
    c. Interest option
    d. Life annuity option

Answer 21

C

Question 22

22. The extent of medical evidence required is determined by
    a. The age of the applicant and the proposed sum to be insured
    b. Occupation of the applicant
    c. Financial condition of the applicant
    d. Date of the last medical examination

Answer 22

A

Question 23

23. The conservation of a life insurance policy is dependent on all the following except
    a. The level of first year commission
    b. Agent’s service oriented attitude
    c. Pressure selling
    d. The use of effective needs selling

Answer 23

C

Question 24

24. All of the following are sources of information to an insurance company pertaining to the insurability of an applicant except
    a. The applicant’s personal appearance
    b. Medical examination report
    c. Agent’s inspection report
    d. Government tax records

Answer 24

D

Question 25

25. If the applicant for life insurance fails to disclose or misrepresents material fact, the contract is
    a. Valid if the insurer issues a policy which is delivered to the applicant
    b. Void from the beginning
    c. Voidable by the insurer if it has been in force less than 2 years
    d. Valid unless the insurer can prove fraud

Answer 25

D

Question 26

26. The settlement options provision may provide all of the following except:
    a. Payment of the proceeds for the life of the insured
    b. Payment of the proceeds over a fixed period
    c. Payments of the proceeds in fixed amounts until exhausted
    d. Proceeds held by the company, with interest payable to the beneficiary on request

Answer 26

D

Question 27

27. Non-forfeiture provisions are included in whole life and endowment policies to assure the policyowner that certain minimum policy benefits shall remain with him even under certain changed conditions. Non-forfeiture values guarantee to the policyowner that
    a. No death claim will be denied for any misstatement on the application
    b. Any guaranteed policy values will belong to the policy owner even if premium payments are discounted
    c. The face amount of the policy will remain the same even if the insured’s health becomes impaired
    d. The premium on the policy will remain the same even when another beneficiary is added to the policy

Answer 27

B

Question 28

28. Purchasing a continuous-premium, whole life policy rather than a limited payment, whole life policy gives the policyowner the advantage of
    a. Concentration of premium payments during the period of highest Earnings
    b. Liberal risk selection procedures
    c. More insurance protection for the same annual premiums outlay
    d. More rapid accumulation of cash values

Answer 28

C

Question 29

29. In certain situations a company may file interpleader actions with a Court of Law. This remedy is used to
    a. Determine if the cause of the insured’s death was an excluded risk
    b. Decide conflicting claims on the same insurance proceeds
    c. Resolve the question of insurable interest
    d. Recommend the best settlement options for the beneficiary If the interest
    on a policy loan is not paid at the policy anniversary the insurance

Answer 29

B

Question 30

30. Which of the following statement is false?
    a. The cash value of a whole life policy builds up at a slower rate than for a 20 year endowment
    b. The cash value in a permanent policy is guaranteed by the company
    c. The cash value of an endowment builds up faster than that for a limited pay life policy of the same duration
    d. Because of its very short duration the cash value of a yearly renewable term policy grows very fast

Answer 30

D

Question 31

31. Which of the following does not have a legitimate insurable interest?
    a. An individual on the life of his mistress
    b. An individual on his own life
    c. An individual on the life of his spouse
    d. A finance company on the life of its borrower

Answer 31

A

Question 32

32. The basic coverage provided by the life insurance policies may be supplemented by a separate provision that provides coverage for accidental amounts or of a different nature. Collectively these provisions are known as
    a. riders
    b. deposit privileges
    c. dividends
    d. assignment

Answer 32

A

Question 33

33. Which of the following statements regarding insurance premiums is false?
    a. Cash is required for all premiums paid in the grace period
    b. A premium is the legal consideration needed to affectuate a life insurance policy
    c. The grace period is usually 31 days
    d. Premiums which are paid quarterly or semi-annually are higher than those paid annually

Answer 33

A.

Question 34

34. A non-forfeiture option would ordinarily be selected at the time a policyowner
    a. Renews a term life policy
    b. Converts a term policy to a whole life policy
    c. Chooses a mode of settlement for the life proceeds
    d. Discontinues premium payments for a whole life or endowment policy

Answer 34

D

Question 35

35. If the interest on a policy loan is not paid at the policy anniversary the insurance company may
    a. Demand full settlement of the loan
    b. Terminate the contract
    c. Refuse to grant future additional loan
    d. Increase the present loan by the interest

Answer 35

D.

Question 36

36. The incontestability clause
    a. Gives the company the right to rescind a policy at any time
    b. Permits the company to pay claims within 2 years
    c. Makes it necessary for the beneficiary to present proof of death in the event of a death claim
    d. Prevents the company from denying a claim after the policy has been in force for 2 years

Answer 36

D

Question 37

37. The insured named a primary and secondary revocable beneficiary for Ps. 20,000 policy. Which of the following is correct?
    a. The designation of a contingent beneficiary is subject to the primary beneficiary’s approval
    b. The insured can add a third beneficiary at any time
    c. Any policy loan assignment will require the primary beneficiary’s signature
    d. Upon the insured’s death the primary and secondary beneficiaries shall each receive Ps. 10,000

Answer 37

B

Question 38

38. 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 insurer will pay
    a. Slightly less than the face amount
    b. The face amount
    c. The face amount adjusted for misstatement of age
    d. The sum of the premium paid

Answer 38

C

Question 39

39. If the interest on a policy loan is not paid at the policy anniversary the insurance company may
    a. Increase the present loan by the interest
    b. Terminate the contract
    c. Refuse to grant future additional loan
    d. Demand full settlement of the loan

Answer 39

A

Question 40

40. A yearly renewable term life insurance policy generally specifies that
    a. The policyowner may renew the policy only once
    b. Premiums shall increase every time the policy is renewed
    c. Evidence of insurability shall be required every renewal
    d. Cash values will increase for as long as the policy is in force

Answer 40

B.

Question 41

41. The following statements concerning insurable interest are correct, except:
    a. Everyone has an insurable interest in his own life.
    b. It is deemed to exist by virtue of a relationship by blood or marriage.
    c. It is deemed to exist if economic loss would occur at the death of the insured.
    d. It is important for purposes of underwriting the risk.

Answer 41

D

Question 42

42. One requirement a policyowner must meet in order to reinstate a life insurance policy is to
    a. Agree to apply future policy dividends toward the payment of premium
    b. Assign the policy collaterally to the insurance company for the amount of the overdue premiums plus any outstanding policy loan
    c. Pay future premiums at the rate for his or her attained age at the time of reinstatement
    d. Furnish evidence of insurability which satisfactory to the insurance company

Answer 42

D.

Question 43

43. If the person whose life is insured dies during the grace period and the premiums was not paid, the amount that the insurance company will pay to the beneficiary is usually the
    a. The face amount of the policy minus the unpaid premium
    b. Cash surrender value of the policy minus the unpaid premium
    c. Full face amount of the policy
    d. Total premiums paid up to the data of birth plus interest

Answer 43

A

Question 44

44. Life insurance guarantees cash benefits for all the following except
    a. Mortgage
    b. Clean-up fund
    c. Family dependency period income
    d. Educational fund

Answer 44

C

Question 45

45. Under an endowment policy, if the person whose life is insured survives to the end of the period stated in the policy, the
    a. Face amount of the policy will be paid
    b. The extended term insurance option will go into effect
    c. Policy will terminate without value
    d. Policy will automatically be converted to paid-up whole policy

Answer 45

A

Question 46

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 dependents
    c. Encouraging provision for the future
    d. All of the above

Answer 46

D

Question 47

47. A yearly renewable term life insurance policy generally specifies that
    a. Premium shall increase every time the policy is renewed
    b. Cash values will increase for as long as the policy is in force
    c. Evidence of insurability shall be required every renewal
    d. The policyowner may renew the policy only once

Answer 47

A

Question 48

48. Which statement is false when the owner borrows on a policy?
    a. Dividend will be reduced by the amount of the current interest
    b. The proceeds of the policy will be reduced by the amount of unpaid loan plus interest, if insured dies
    c. The policy will lapse if, after reasonable notice the indebtedness exceeds the cash value
    d. If a large loan is taken after the policy has been in force for some years, the interest cost may exceed the premium

Answer 48

A

Question 49

49. All of the following are Standard Provision of a life insurance policy except:
    a. A grace period clause
    b. An entire contract clause
    c. An automatic premium loan clause
    d. A misstatement of age clause

Answer 49

B

Question 50

50. All of the following term policies can be sold as a basic policy contract except
    a. Six months interim term
    b. Decreasing term
    c. Ten year term’
    d. Yearly renewable term

Answer 50

A

Question 51

51. A housewife without gainful employment applies for a P500,000 life coverage. Which of the following should the agent do?
    a. Tell her she has no need for it
    b. Examine the adequacy of the husband’s insurance coverage
    c. Suggest she doubles the amount
    d. Be grateful

Answer 51

B