NAME______________________________

UNIT_______________________________
SCORE______________________________

TRADITIONAL LIFE

Direction: Choose the best answer, Indicate your answer on an answer sheet by
writing the letter.

1. Both endowment and term policies provide that

a. No cash value is available to the policy owner during 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 specific period

2. Indicate which of the following is not a function if an application for life

insurance policy.
a. To give details pertaining to non- forfeiture options
b. To furnish information on which the contract of the 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.

3. A father has his present life insurance payable to his estate and because he
has now retired he wants to pass the policy in to his son who will assume
the premium payments. Which of the following will be have to appoint his
son to achieve his desire to protect the son from estate tax liability?

a. Irrevocable Primary Beneficiary

b. Absolute Assignee
c. Irrevocable Secondary Beneficiary
d. Revocable Beneficiary

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
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

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.

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.

8. In the event that a policy owner elects the paid up insurance option

a. The premium stop and the policy continues for the full of face amount until
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

9. The company will allow a policy change from a higher premium to a lower
premium provided the insured.

2
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.

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

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.

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. Related to the insurability of the applicant
d. Describes the desired benefits and mode of payment.

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

14.The total live coverage of a permanent basic poliy can be greatly increased
through the use of

3
a. An accidental death benefit rider
b. An interim term rider
c. A supplement term rider
d. None of the above

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.

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.

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 provided interim insurance that remains in effect until the
policy is issued or the application is declined

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 the life insurance protection for only the period of time specified
in the policy contract

4
d. Contain provisions for automatic contribution of the insurance protection
at the end of a specified period.

19.An agent who determines a prospect’s complete financial requirements

preparatory to offering him a policy using the correct selling approach
known as

a. Counselor selling
b. Total Needs Selling
c. Planned Selling
d. Multiple Products Selling

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

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 options
d. Life annuity option

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

23.The conservation of a life insurance policy is dependent on all the following

except.

5
a. The level of first year commission
b. Agent’s service oriented attitude
c. Pressure selling
d. The use of the effective needs selling

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

25.If the applicant for life insurance fails to disclose or misrepresents material
fact, the contact is.
a. Valid if the insurer issues a policy which is delivered to the applicant
b. Valid 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.

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.

27.Non-forfeiture provisions are included in a whole life and endowment

policies to assure the policy owner that certain minimum policy benefits
shall remain with him even under certain changed conditions. Non
forfeiture values guarantee to the policy owner that

a. No death claim will denied for any misstatement if 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
health becomes impaired.
d. The premium on the policy will remain the same even when another
beneficiary is added to the policy

6
28.Purchasing a continues premium, whole life policy rather that a limited
payment, whole life policy gives the policy owner the advantaged 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.

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 of the insurance.

30.Which of the following statement is false?

a. The cash value of the 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.

31.Which of the following does not have a legitimate insurable interest?

a. An individual on the life of the 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.

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

7
a. Riders
b. Deposit privileges
c. Dividends
d. Assignment

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 effectuate 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

34. A non-forfeiture option would ordinarily be selected at the time a policy

owner

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 of endowment policy

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

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
force for 2 years.

8
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

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 insure 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

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

40.A yearly renewable term life insurance policy generally specifies that

a. The policy owner 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.

9
 Direction : Write T if the statement is TRUE and F if the statement is FALSE

1. In a case where the premium has not been paid and the cash values has
been exhausted, the policy can avail of the grace period- TRUE

2. According to the law of large numbers, events which happen seemingly by

chance will actually be bound to follow a predictable pattern, if enough
such happenings are observed. FALSE

3. Anti-selection occurs when persons in poor health wish to buy insurance. -

TRUE

4. A policy us still in force for the full face amount and will remain in force for
a further period if four years and 118 days, without the payment of any
premiums has availed of paid up insurance option. - FALSE

5. In the case of misstatement of age, the amount of insurance is adjusted to

the amount which premium paid at the correct age would have purchased.-
TRUE

6. A policy that provides guaranteed cash values plus extra annual distribution
and pays the insured after a specified time is known as a participating
endowment. TRUE

7. In a group insurance it is assumed that every member of the group is

insurable, provided that every member of the group is working a minimum
number of (usually 50 hours) each week. - FALSE

8. An endowment at age 65 policy with premium payable for a limited period

of 20 years pays the full amount after 20 years. - FALSE

9. In most life insurance application, the largest amount of information

requested is data which identifies the applicant. - FALSE

10. A policy is not rendered void by reason of misstatement of the assured’s

death. - TRUE

10