TRAD REVIEWER

Question 1

1. A life insurance agent is permitted to
   a. Approve an application for insurance
   b. Waive any of the requirement of the company
   c. Guarantee dividends on participating policies
   d. Prepare routine proposals for life insurance coverage

Answer 1

D

Question 2

2. Claire is considering purchasing either an endowment or term life policy. What do these policies have in common?
   a. Insurance protection will be limited to a specified period
   b. Renewal and conversion privileges are available
   c. No cash value is available to the policy owner during the term of the policy
   d. A benefit will be paid at the end of the period of coverage if the person is then alive

Answer 2

A

Question 3

3. A client tells you that his bank wants him to use his insurance policy so that his bank loan will be paid off if he dies. Which of the following will you recommend?
   a. He appoints an irrevocable beneficiary b. He makes an absolute assignment
   c. He makes a collateral assignment
   d. None of the above

Answer 3

C

Question 4

4. If premiums are being waived under a waiver of premiums benefit and the insured dies, what would the proceeds be?
   a. Reduced paid-up face amount
   b. Face amount less unpaid premiums
   c. Cash surrender values
   d. Face amount

Answer 4

D

Question 5

5. Which of the following is a living benefit in an insurance policy?
   a. Guaranteed insurability benefit
   b. Right to change beneficiaries
   c. Waiver of premium for disability
   d. Cash surrender value

Answer 5

D

Question 6

6. 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 entered
   d. To make sure that he will pay the premiums

Answer 6

B

Question 7

Your client George wants to apply for a life insurance policy. As his advisor, you would advise him to do all of the following, EXCEPT which one?
a. Furnish initial information as to insurability
b. Give details pertaining to non-forfeiture options
c. To convey to the company the desire of the applicant to obtain insurance
d. To furnish information on which the contract of life insurance may be written

Answer 7

C

Question 8

8. Which of the following does a limited pay life policy provides?
   a. Protection for the life of the policyholder with premiums payable for a limited term of
   years
   b. Low-cost protection only for a limited term of years with no savings
   c. The highest level of savings for the insured within a specified term of years
   d. Protection with premiums payable for life and a low level of savings as an alternative to
   continued protection in old age

Answer 8

A.

Question 9

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

Answer 9

A.

Question 10

10. Group life insurance covers ____.
    a. Death provided it is during working hours and in the place of employment
    b. Death of the employee regardless of cause except suicide during the first year
    (sometimes two years)
    c. Accidental death only
    d. Only death by heart attack, pneumonia or cancer

Answer 10

B

Question 11

11. Your client tells you that when his father died, he received P500,000 free of Estate Tax, and that he had not even known that his policy existed. Which of the following classifications did your client fall under?
    a. Collateral assignee
    b. Absolute assignee
    c. Revocable primary beneficiary
    d. Irrevocable primary beneficiary

Answer 11

D.

Question 12

12. Mr. Sy walked out of his house one night, and was never heard from since. His wife wanted to make a claim on his insurance policy, as she believes that he is dead. In this case, which of the following statements is correct?
    a. It will take four years before the court could declare him legally dead.
    b. It will take seven years before the court could declare him legally dead.
    c. The company will pay immediately.
    d. It will require 6 months before the court could declare him dead.

Answer 12

B

Question 13

13. In life insurance, which of the following does the term “substandard rates” generally refer to?
    a. Premiums charged for policies with low amounts
    b. Premiums charged to persons who are considered to be higher-than-average risk
    categories
    c. Mortality rates that are lower than the rates suggested by the regulatory authorities
    d. Mortality rates that are lower than those expected by the company according to its mortality table

Answer 13

B.

Question 14

14. Life insurance policy loans are limited to an amount which with interest will not exceed the ___.
    a. Cash value of the policy
    b. Total premiums paid
    c. Net amount of risk
    d. Present value of future premiums

Answer 14

A.

Question 15

15. What happens to a policy when an irrevocable beneficiary has been designated and the policy owner needs to loan against his policy for a specific reason?
    a. Alter the dividend option now in effect
    b. Any transactions or changes in the policy would need the endorsement of the
    irrevocable beneficiary
    c. Avail of a non-forfeiture option
    d. Borrow minimal cash loan

Answer 15

B.

Question 16

16. The fundamental advantage of the use of life insurance as a means of meeting economic losses is that through life insurance, these losses are
    a. Reduced for the group as a whole through the multiplier effect
    b. Deferred for a specified period of time
    c. Met as they rise through savings accumulated on an assessment basis
    d. Spread over a large number of people

Answer 16

D

Question 17

17. Which of the following statements is FALSE?
    a. When an agent makes a sales presentation, he has to sell confidence in the product.
    b. When an agent meets a prospect for the first, he has to sell confidence in himself.
    c. The primary job of an agent is to get people happily involved with the ownership of his
    policy.
    d. The job of an agent is to squeeze as much money as possible out of making a new sale.

Answer 17

D

Question 18

18. What will happen if the insured fails to pay the interest on a policy loan during its policy anniversary?
    a. Terminate the contract
    b. Refuse to grant future additional loan
    c. Increase the present loan by the interest
    d. Demand full settlement of the loan

Answer 18

C

Question 19

19. If a policyholder changes his occupation without notifying the company, would it affect the benefits under his policy?
    a. No, benefits and premiums may only be changed at the renewal date of the policy.
    b. Yes, unless the policy specified otherwise. If he engaged in a more hazardous
    occupation, his benefits may be pro-rated.
    c. No, benefits agreed upon at the inception of the policy may not be changed.
    d. None of the above.

Answer 19

C

Question 20

20. 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 loan, guaranteed insurability

Answer 20

B

Question 21

21. A businessman has arranged for a development loan that will available 1 year from now. Because he is unable to wait until then he has arranged an interim loan with his bank. The only problem is that the bank wants loan secured against the risk of his death. What is the best economic arrangement that you recommend?
    a. Decreasing term
    b. Interim term
    c. Extended term
    d. Yearly renewable term

Answer 21

D

Question 22

22. In which circumstance does an insurance company have the right to rescind a policy?
    a. Insured person is killed in military action during the contestable period of the policy
    b. Insured person intentionally kills himself during the suicide exclusion period specified in
    the policy
    c. Company discovers during the contestable period that the application contains a
    material statement
    d. Company discovers at any time that the policy owner was actually a minor at the time of
    application

Answer 22

D

Question 23

23. A prospect tells you that he wants to be insured at age 65, but he does not want to pay more than the minimum possible level of premiums. Would you offer him?
    a. Endowment policy
    b. Term policy
    c. Whole life policy
    d. A life at age 65 policy

Answer 23

B.

Question 24

24. An applicant wants to get a participating policy that will have the maximum cash available for emergencies. Which of the following should he select?
    a. Accumulated dividends
    b. Extended term insurance
    c. Loan value
    d. Paid-up addition

Answer 24

A.

Question 25

25. The following statements are true with respect to reinstatement process EXCEPT ____.
    a. Assumption or repayment of any indebtedness
    b. Written assurance of intent to keep the policy in force
    c. Payment of back premiums with interest
    d. An application for reinstatement

Answer 25

B

Question 26

26. 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

Answer 26

C

Question 27

27. Which of the following best describes a person’s human economic value?
    a. Total value of the individual’s tax contribution to the national economy
    b. Total value of his physical assets
    c. The amount of capital required to replace family income needs
    d. Total value of the assets and any future earnings derived therefrom

Answer 27

D.

Question 28

28. The basic purposes of a conditional premium receipt are to acknowledge payment of initial 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 issues as applied for
    d. Backdate the policy to save age

Answer 28

B.

Question 29

29. Which of the following statements best describes a Pure Endowment policy?
    a. It pays proceeds to the insured only if he lives to the end of a specified period.
    b. It pays proceeds to the insured if he lives to the end of endowment period, or pays the
    face amount to named beneficiary if the insured dies before the end of the endowment
    period.
    c. It is actually a combination of endowment insurance and term insurance.
    d. None of the above.

Answer 29

A.

Question 30

30. Which of the following considerations is required by the life insurance company to make the insurance coverage effective?
    a. Beneficiary’s continuing insurable interest in the life of the insured
    b. Payment of the initial premium
    c. Applicant’s promise to act in good faith
    d. Payment of each renewal premium before the end of applicable period

Answer 30

B

Question 31

31. Gwen is thinking of electing the paid-up insurance option, what will happen to her policy if she does?
    a. The premiums cease and protection continues with a reduced amount of coverage.
    b. The premiums stop and the policy continues for the full face amount until age 65.
    c. The insurance continues at a reduced amount and with a reduced premium.
    d. The policy will automatically terminate.

Answer 31

A

Question 32

32. The company usually allows a policy change from a higher premium to a lower premium if the insured ____.
    a. Momentarily assigns the policy to the company
    b. Buys a new plan altogether
    c. Presents satisfactory evidence of insurability
    d. Obtains written consent from his or her spouse

Answer 32

C

Question 33

33. An applicant wants a participating policy where the death benefit will be maximized. Which of the following should he choose?
    a. Paid-up additions
    b. Accumulated dividend
    c. Extended term
    d. Paid-up insurance (reduced insurance)

Answer 33

A.

Question 34

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

Answer 34

B

Question 35

35. Which of the following does a whole life provide?
    a. Protection for the life of the policyholder with premiums payable for a limited term of
    years
    b. Low cost protection only for a limited term of years with no savings
    c. The highest level of savings for the insured within a specific term of years
    d. Protection with premiums payable for life and low level of savings as an alternative to
    continued protection in old age

Answer 35

D.

Question 36

36. In practice, most claims for the death benefits of life insurance policies are ____.
    a. Investigated thoroughly for evidence of misrepresentation or fraud before payment is
    made
    b. Paid on the first policy anniversary after the death of the insures
    c. Settled by interpleader proceedings
    d. Paid promptly as soon as properly completed claim forms are received by the company

Answer 36

D

Question 37

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

Answer 37

C

Question 38

38. Which policy permits the policyholder to vary the level of premiums, the sum insured, and has its cash values dependent on the investment performance, and the level of premiums paid?
    a. Universal life
    b. Participating whole life policy
    c. Participating endowment
    d. None of the above

Answer 38

A

Question 39

39. 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

Answer 39

D

Question 40

40. For the waiver of premium to be effective
    a. Disability must be total
    b. Disability must be permanent
    c. Bothaandb
    d. Either a and b

Answer 40

C

Question 41

41. In a life insurance company, risk appraisal is necessary to:
    a. Prevent anti-selection
    b. Project dividend rates for participating policies
    c. Collate mortality statistics
    d. Calculate the mortality rate for a given policy

Answer 41

A.

Question 42

42. Limited payment life policies are called as such because those policies _____.
    a. Shorten the period when the benefits may be paid
    b. Limit the period during which the premiums are payable
    c. Limit the conditions under which the policies are payable
    d. Limit the number of beneficiaries, thereby, minimizing the problems of paying too many people

Answer 42

B

Question 43

43. Which of the following is a settlement option?
    a. Cash surrender value
    b. Extended term insurance option
    c. Policy loan
    d. Interest on insurance proceeds

Answer 43

D

Question 44

44. The following statements about “Disability Waiver of Premium Rider” are true, except:
    a. There is a waiting period
    b. Disability must occur before a stated date
    c. The insured has to die while disabled
    d. It has to be attached to a life insurance policy

Answer 44

C

Question 45

45. Which of the following statements is false?
    a. Too many lapsed policies can cause an agent’s agreement to be cancelled.
    b. When a policy lapses, the agent loses a valuable source of prospect.
    c. When a policy lapses, the agent loses all future commissions on renewal premiums.
    d. Agents with persistent business seldom stay long with one company.

Answer 45

D

Question 46

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

Answer 46

B

Question 47

47. “Critical years” in the programming of life insurance means:
    a. Retirement years
    b. Years between the time the youngest child is 15 years old and the mother is 62 years old
    c. Years immediately following the insured’s death
    d. Period during which the children are small, and cannot provide for themselves

Answer 47

D

Question 48

48. Jared wants to update his yearly renewable term life insurance policy. Which of the following applies to a yearly renewable term life insurance?
    a. The policy owner may renew the policy only once.
    b. Evidence of insurability shall be required every renewal.
    c. Cash values will increase for as long as the policy is in force.
    d. Premiums shall increase every time the policy is renewed.

Answer 48

D

Question 49

49. The Insurance Commissioner has the power to revoke or refuse an agent’s license in all of the following instances, except:
    a. When the applicant for license has intentionally withheld information concerning his conviction of a crime involving moral turpitude
    b. When the agent has diverted any premium collection for his personal use
    c. When an agent influences the applicant’s choice of plan to be purchased
    d. None of the above

Answer 49

C

Question 50

50. 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 the information he wants the agent to know

Answer 50

C

Question 51

51. Which rider could greatly increase the total life coverage of a permanent basic policy?
    a. An accidental death benefit rider
    b. A supplemental term rider
    c. An interim term rider
    d. None of the above

Answer 51

B

Question 52

52. When does an interpleader come into play?
    a. To decide conflicting claims on the same insurance proceeds
    b. To determine if the cause of the insured’s death was an excluded risk
    c. To recommend the best settlement options for the beneficiary if the interest on a policy loan is not paid at the policy anniversary of the insurance
    d. To resolve the question of insurable interest

Answer 52

A.

Question 53

53. For life insurance coverage to be valid, insurable interest must exist
    a. Only at the inception of the policy
    b. Only at the time of the loan
    c. Throughout the lifetime of the policy
    d. Both at the time of policy issue and at the time of the loan but not necessarily throughout the lifetime of the policy

Answer 53

A.

Question 54

54. How does the law of probability help life insurance companies?
    a. Predict when an individual insured will die
    b. Estimate future death rates among members of a given group
    c. Determine the experienced death rate among the insured persons
    d. Develop statistics of past deaths among the general population

Answer 54

B.

Question 55

55. If Phoebe wants to continue her renewable term insurance, which of the following she may do?
    a. Change the life insured at renewable date
    b. Renew at the same premium for further period of years
    c. Renew providing the insurance company agrees to continue coverage
    d. Renew the coverage based on a higher premium

Answer 55

D.

Question 56

56. Mr. Barrio has been insured under the employee group life insurance plan for several years.
    Which of the following will happen to Mr. Barrios’ group life insurance if he leaves this job?
    a. Changed, upon the employer’s notice to the insurance company, to a permanent plan of insurance for the same amount
    b. Continue to provide coverage of the same amount for a period of 31 days during which
    Mr. Barrio can convert to an individual policy
    c. Cover him for a reduced amount of paid-up term insurance until the end of the current policy year
    d. Coverage will stop at once

Answer 56

B

Question 57

57. A whole life policy with an initial premium rate that applies to the first five (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
    b. A modified life policy
    c. An experience-premium policy
    d. A guaranteed renewable policy

Answer 57

B

Question 58

58. What is the purpose of the incontestability clause?
    a. Permits that company to pay claims within two (2) years
    b. Gives the company the right to rescind a policy at any time
    c. Prevents the company from denying a claim after the policy has been in force for two (2)
    years
    d. Makes it necessary for the beneficiary to present proof of death in the event of a death
    claim

Answer 58

C.

Question 59

59. In life insurance, there is always “agency” relationship between the ____.
    a. Beneficiary and the insurance company
    b. Insured and the insurance company
    c. Soliciting agent and insurance company
    d. Policyowner and the soliciting agent

Answer 59

C

Question 60

60. Clark applied for a Ps. 20,000 whole life policy, and paid the full initial premium to his agent, who issued a binding receipt. Under such scenario, what does the insurance company do?
    a. Guarantee the policy will be issued as applied for
    b. Offer permanent insurance coverage effective as of the date of the application
    c. Immediately provides interim insurance that remains in effect until the policy is issued
    or the application is declined
    d. Promise that the insurance coverage will become effective as of the date of the application is approved

Answer 60

C

Question 61

61. Which of the following statement is correct?
    a. Orphan policy owners hardly need an agent’s services
    b. Orphan policy owners will only deal with their original agents
    c. New agents should stay away from orphan policy owners
    d. Orphan policy owners are good sources of prospect and new sales

Answer 61

D.

Question 62

62. The widow of your policyholder tells that she does not want a lump sum payment, but she
    prefers to receive monthly allowance for the rest of her natural life. Which option do you
    recommend?
    a. Periodic annuity option
    b. Life annuity option
    c. Fixed period option
    d. Fixed income option

Answer 62

B.

Question 63

63. 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 heath history
    c. Income, educational attainment and occupation
    d. Death income and educational background

Answer 63

B.

Question 64

64. How are endowment life insurance and term life insurance the same?
    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 specified
    period
    c. Contain provisions for automatic continuation of the insurance protection at the end of
    a specified period
    d. Provide life insurance protection for only a period of time specified in the policy contract

Answer 64

D

Question 65

65. A prospect tells you that he wants the maximum possible provision for his retirement with no life coverage. Which of the following would you offer him?
    a. Whole life policy
    b. A life paid-up at age 65 policy
    c. A 20-pay life policy
    d. None of the above

Answer 65

D

Question 66

66. Some insurance companies charge females a lower premium rate than males. Which of the following justifies the practice?
    a. Women are less likely to lapse the policies
    b. Generally, women have less hazardous jobs
    c. Women have a longer life expectancy (after age 54) than men
    d. Generally, women buy the higher premium rate policies, such as an endowment policy
    or retirement income policy

Answer 66

C

Question 67

67. At the end of 25 years, which statement is true for a 25-year Life policy and is not for a 25-year endowment?
    a. No further premiums are paid
    b. The contract is terminated
    c. The sum insured is paid
    d. The insurance remains in-force

Answer 67

D

Question 68

68. Which of the following sales practices determines a prospect’s complete financial requirement before offering a policy?
    a. Planned selling
    b. Counselor selling
    c. Multiple products selling
    d. Total needs selling

Answer 68

D.

Question 69

69. Insurance provides protection against economic loss by enabling the policy owner to ____.
    a. Transfer responsibility for the loss to others
    b. Take speculative risk to compensate for the loss
    c. Reduce the possibility of the occurrence of the event causing the loss
    d. Share the loss with others exposed to similar risk

Answer 69

D

Question 70

70. When is the only instance a life insurance contract is treated primarily as an indemnity agreement?
    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

Answer 70

B

Question 71

71. 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

Answer 71

A

Question 72

72. William chose a straight-premium whole life policy over a limited payment whole life policy. What is the advantage of such purchase?
    a. Liberal risk selection procedures
    b. Concentration of premium payments during the period of highest earnings
    c. More rapid accumulations cash values
    d. More insurance protection for the same annual premiums outlay

Answer 72

D

Question 73

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

Answer 73

B