Final Exam

1. What is the name of an early form of life insurance dating back to Ancient Rome?
Ceasar's liberties
Roman life policies
Zeus post-life clubs
Burial clubs

2. When did the sale of life insurance in the U.S. Begin?
1650's
1760's
1890's
1920's

3. Around what year were the first mortality tables created?
1820
1720
1620
1520

4. One of the first places to transact insurance, Edward Lloyd's coffee house, later became known as:
Lloyd's of London
Prudential
New York Life
Geico

5. Who establishes the world’s first mutual insurers in 1752?
Edward Rowe Mores
Edward Lloyd
Richard Martin
John Graunt

6. What was the name of the United States’ first fraternal benefit society that provided members with life insurance protection for their dependents?
Railroad Union
The Ancient Order of United Workmen
USA Life Society
Lloyd's of America

7. Which organization provides industry leading research for retirement, insurance, and distribution?
Life Insurance Management Research Association (LIMRA)
Association of Life Insurance Managers (ALIM)
Association of Life Agency Officers (ALAO)
Insurance Office Management Research Association (IOMRA)

8. In the 1970's what percentage of U.S. adults own life insurance?
15%
37%
72%
95%

9. Approximately how much was paid out in life insurance claims due to 9/11?
$100,000
$1million
$500 million
1.2 billion

10. Who's mortality tables were used that provided some of the input used in early probability calculations?
Church
Police
Government
Libraries

11. Approximately how many uninsured homes burned in the Great Fire of London?
1,000
10,000
70,000
1 million

12. After the Great Fire of London, Nicholas Barbon created the first what?
Joint stock insurance company
Life insurance company
Homeowners policy
Fire insurance policy

13. Towards the end of the 18th century the first truly modern and global insurance company was was founded by an association of sugar refinery owners in London. What was it called?
The Phoenix
Lloyd's of London
Prudential
New York Life

14. In a life insurance policy, who is the person that will pay for the policy?
The insured
The guarantor
The beneficiary
The insured

15. Specific factors that may be considered by underwriters include:
Personal medical history
Family medical history
Driving record
All of the above

16. Many companies separate applicants into four general categories. Which is not one of them?
Best
Preferred
Tobacco
Non-tobacco

17. Life insurance may be divided into two basic classes. What are they?
Temporary & permanent
Life & death
Group & universal
Mortality & fire

18. Which is not one of the three basic types of permanent insurance?
Whole life
Universal life
Endowment life
Term life

19. _____ are modifications to the insurance policy added at the same time the policy is issued.
Riders
Endowments
Evaluations
Units

20. A life insurance policy that is held or financed by a person who has no relationship to the insured person is called:
Whole life
Universal life
Endowment life
Stranger-originated life

21. What is a viatical settlement?
The purchase of a life insurance policy from an elderly or terminally ill policy holder
Settling a policy for a person killed in war
Negotiating for a higher benefit because of health changes
Negotiating for a lower premiums because of health changes

22. Premiums for insurance should always this criteria:
They must be adequate
They must be reasonable (or equitable)
They should not be unfairly discriminatory
All of the above

23. It is generally acknowledged that to determine the insurance premium (and reserves), there must be information and assumptions available regarding:
The probability of the insured event happening
The time value of money
The benefits of the contract
All of the above

24. A_______ policy provides coverage for a period of one year only but allows the policy owner to renew the policy at the end of each year.
Yearly renewable term policy
Endowment policy
Distributed policy
Group life

25. An insurance contract is a contract of ________. This means that both parties to the insurance contract can rely upon the good faith of the other and therefore cannot deceive, attempt to deceive, or withhold pertinent information from the other party.
Good faith
Policy
Economics
Endowment

26. Since the insurer is the only party that gives a (legally enforceable) promise in the contract. Insurance contracts are considered:
Unilateral
Bilateral
Trilateral
Polylateral

27. Which is not one of the 4 requirements of a contract?
Legally capable
Endowement
Mutual agreement
Consideration

28. A life insurance policy must, by law, be based upon what?
An insurable interest
A bilateral agreement
A concealed agreement
Distributed policies

29. Withholding of information or facts that the insurance company should know is called what?
Sliding
Defamation
Concealment
Concurring

30. __________ is giving an incorrect statement to an insurance company concerning personal health history, family health history, occupation and hobbies.
Sliding
Defamation
Concurring
Misrepresentation

31. By law, people are presumed to be dead when they disappear for how long?
7 years
6 months
21 years
1 year

32. The pertinent policy provision that states that the insurer cannot contest the policy after it has been in force for two years while the insured is still alive is called what?
Insurable clause
Death clause
Incontestable clause
Pertinent clause

33. The right of an insurance company to defer any cash-value payment or make a policy loan for a period of up to six months after it has been requested is called:
Death clause
Endowment clause
Delay provision
Incontestable provision

34. The two types of exclusions generally used are:
The fire exclusion and the aviation exclusion
The war exclusion and the aviation exclusion
The war exclusion and the flood exclusion
The fire exclusion and the flood exclusion

35. What is the person called who is named first to receive the proceeds from a life insurance policy?
Primary beneficiary
Contingent beneficiary
First beneficiary
Family beneficiary

36. Which is an example of a type of settlement option?
Lump sum
Interest only
Fixed amount
All of the above

37. Which type of settlement option proceeds are paid into an account and the beneficiary can draft the account for part or all of the funds as they desire?
Flexible spending account
Individualized options
Lump sum
Joint and survivorship option

38. Insurance is “property” – legally and technically – and therefore any ownership rights in a policy can be transferred by the policy owner to another party. What is this called?
Transfership
Endowment
Assignment
Bowership

39. There are two types of assignments, what are they?
Absolute and collateral
Relative and absolute
Endowment and real
Real and collateral

40. _____ is the transfer by the policy owner of all rights in the policy to another person.
Absolute assignment
Relative assignment
Collateral assignment
Viatical assignment

41. Since insurance is property, a ______ is a temporary transfer of only some of the property – policy ownership rights – to another person and are usually used for loans from lending institutions.
Absolute assignment
Relative assignment
Collateral assignment
Viatical assignment

42. Policies are required in most jurisdictions to have a _______ which simply states that if the insured’s age is found to have been misstated, the amount of insurance will be adjusted to be that which would have been purchased by the premium paid, if the correct age were known.
Defamation provison
Misstatement of age provision
Viatical provision
Renewal provison

43. Which policy rider would pay a benefit if the insured had their hand accidentally chopped off?
Guaranteed Insurability Rider
Cost of Living Rider
Term Rider
Accidental Death and Dismemberment Rider

44. Which type of insurance provides for a level death benefit over the period of the policy, with either level premiums or with premiums that increase with age?
Endowment life
Whole life
Varying face amount
Term life

45. Which policy generally uses interest rates that reflect the new-money rates and will also use the current mortality charges in determining the cash value?
Limited payment whole life
Current assumption whole life
Ordinary life
Varying face amount

46. _____ insurance policy is a whole life policy with the early premium (from one to five years) considerably lower than the typical whole life policy and with higher premiums after the modified period.
Limited payment whole life
Current assumption whole life
Term life
Modified life

47. A participating whole life policy that uses dividends to reduce the premiums of the policy is called:
Enhanced life insurance
Dividend life insurance
Limited payment whole life
Current assumption whole life

48. What was the major type of life insurance sold in the U.S. until the beginning of the 20th century?
Dividend life insurance
Limited payment whole life
Current assumption whole life
Debit insurance

49. The policy that provides for whole life insurance for the father or mother, and with term insurance for the other family members is called what?
Parental policy
Family policy
Juvenile policy
Whole policy

50. What policy provides a fund will be made available for final expenses, and in most cases, it is used to fund a prearranged funeral?
Parental insurance
Family insurance
Adult insurance
Burial insurance

51. When the group is comprised of two or more small employers who have come together to purchase a single group plan, what are they are called?
Multiple employer trusts
Single employer trusts
Poly-employer trusts
Vari-trusts

52. Creditor-debtor group insurance is offered by the lender to whom?
The banks
Insurers
Employers
Those who borrow money from them

53. Which is not a step when an agent provides a quote?
Outline the client’s current coverage
Outline other available coverage in an apples-to-apples format
Make note to the client of extenuating facts
Adjusting the claim

54. What are the organizations that issue the policies called?
Adjuster
Agents
Insurers
Insureds

55. Since insurers deal in promises a legal document is required. What is that legal document called?
Insurance policy
Appraisal
Estimate
All of the above

56. To avoid adverse selection, what is necessary to have?
A small number of policyholders that want to insure against the same risk
A large number of policyholders that want to insure against different risks
A small number of policyholders that want to insure against different risks
A large number of policyholders that want to insure against the same risk

57. Insurance on a person who is vital to the smooth operation of the company is called:
Key person insurance
Limited payment whole life
Current assumption whole life
Debit insurance

58. Key insurance is often used to protect the surviving members of the business where the loss or disability of a partner, stockholder or key employee could:
Adversely affect who controls the company
Dissolve the business entirely
Adversely affect the company’s value
All of the above

59. A_____ is a legal document used to protect the interest of a deceased or disabled member, while also protecting the interest of surviving or healthy members.
Buy-and-Sell agreement
Limited payment agreement
Estimate appraisal
Debit insurance

60. Which life insurance policies offer flexible premium payments and adjustable death benefits?
Whole life
Universal life
Current assumption whole life
Debit insurance

61. ____is a policy that has the premium flexibility and policy adjustment features of universal life with the investment options of variable life, which helps to explain why this policy is so popular.
Variable universal life
Term life
Endowment life
Bi-lateral life

62. What is the legal process by which the state validates the will after the individual dies, pays remaining debts, and guarantees the will is carried out as directed by the testator?
Testament
Probate
Estimate
Guarantor

63. Which question would not measure an insurance risk?
Does the applicant smoke or chew tobacco products?
Does the applicant drink alcohol and, if so, how much and how often?
Does the applicant have a regular exercise routine?
Does the applicant have red hair?

64. Which plan splits the premiums between the employer and the employee?
Dividend life insurance
Split-dollar plan
Limited payment whole life
Current assumption whole life

65. Which are the principal types of closely held firms?
Sole Proprietorships
Partnerships
Closely held corporations
All of the above

66. Which is not an insurer and agent risk?
Estate risk
Legal risk
Reputational risk
Operational risk

67. Which is the program regulated by the PATRIOT Act, requiring verification of the client’s identity to the extent that is reasonable and practicable of any person seeking to open an account or place an application?
Background Check (BC)
Anti Trust (AT)
Know Your Customer (KYC)
Veri Facts (VF)

68. Which is not an example of what reinsurance enables an insurance company to do?
Expand its capacity
Stabilizes its underwriting results
Re-underwrite its existing policies
Secure catastrophe protection against shock losses

69. Secure catastrophe protection against shock losses
Sex
Military status
Avocation
All of the above

70. Which sources of information would not be used in underwriting?
Agent statements
Political party
Inspection companies
Databases sponsored by the insurance industry

71. The association whose purpose is to maintain and improve state regulations, ensure the reliability of insurers as to financial solidity and financial guaranty, and the “fair, just and equitable” treatment of policy owners and claimants is called:
National Association of Insurance Commissioners
Internal Association of Revenue Services
Sherman Act
Federal Association Bureau

72. Which is an example a type of insurer regulated by the insurance departments:
A domestic insurer is domiciled in the regulated state
A foreign insurer is an insurance company that is domiciled in another state or territory
An alien insurer is an insurance company that is domiciled in another country
All of the above

73. Which government entity oversees the design, operation and marketing of variable life and annuity products?
Securities and Exchange Commission
Internal Revenue Service
National Association of Insurance Commissioners
Federal Annuity Bureau

74. A living trust that the grantor of the trust can change or terminate as they wish, and can regain ownership of the property is called:
Irrevocable trust
Reverse split dollar plan
Revocable trust
Grantor trust

75. Which type of insurance company is organized where stockholders, not policy owners, own the company and share in profits?
Trust insurance company
Mutual insurance company
Grantor insurance company
Stock insurance company