PCE Sample Exam_2
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The document consists of a series of sample questions designed for agency training in the insurance sector, covering various concepts related to insurance, risk management, and legal aspects of insurance contracts. Topics include the definitions of peril, types of risks, principles of indemnity, and the importance of insurable interest. It also addresses the responsibilities of agents, the legal framework governing insurance, and the principles of utmost good faith in insurance agreements.
PCE Sample Exam_2
- 1. Agency Training E&OE 1 SAMPLE QUESTIONS FOR PCE 1. Peril is A. A loss of properties and lives B. A financial loss C. A cause of loss D. The exposure to danger 2. Trade risk is not insurable because it is a A. Pure risk B. Fundamental risk C. Particular risk D. Speculative risk 3. The functions of insurance include the following I. Stimulates business enterprise II. Reduction of losses III. Provides employment for many IV. Sources of capital for investment A. II & IV B. II, III & IV C. I & II D. I, II, III & IV 4. Insurance is A. A loss sharing arrangement B. A pooling of risk C. An economic institution D. All the above 5. In insurance, the contributions made by individuals who face the same risk to compensate for their misfortunes against financial losses is called A. Remedies B. Premium C. Aqad D. Takaful 6. To be an effective agent, which of the following should NOT be done? A. To recognize the insuring needs of the client B. To provide advise to the client C. Bring financial relief to aggrieved dependents of the insured D. To ensure the products proposed is beyond the resources of the prospective policyholder 7. The methods of indemnity include I. Payment by cash II. Replacement III. Reinstatement IV. Repair A. I, II & III B. I, II & IV C. I, III & IV D. I, II, III & IV 8. For personal accident policies, the most important cause is called A. Proximate cause B. Mortality cause C. Crucial cause D. Deciding cause 9. Which of the following is one of the risks handling methods? A. Risks manipulation B. Risks protection C. Risks modification D. Risks retention
- 2. Agency Training E&OE 2 10. Which of the following describe the definition of risks? A. An uncertainty regarding loss B. A condition that increases the chance of loss C. A reduction of economic value D. All of the above 11. Which of the following is NOT true about the categories of risk? A. Particular risks are the responsibility of the individuals themselves B. Pure risks exists when there is the possibility of either loss or no loss C. Investment in the stock market is considered as speculative risk D. Pure risk and speculative risk can easily be handled by insurance technique 12. Risk of property damage from earth quake, flood and typhoon is classified under A. Fundamental risk B. Speculative risk C. Particular risk D. Pure risk 13. Which of the following is NOT true about the criteria of insurable risk? A. Insurance risks must be capable of being financially measured B. Insurable risks should have the possibility of profits, loss or no loss C. There must be a large number of similar risks involved D. There must not be a large number of similar risks involved at the same time 14. The essential elements of a contract are offer, acceptance and A. Consideration B. Legality of object C. Capacity to contract D. All of the above 15. The transfers of legal rights and obligations under a life insurance policy to another person is called A. A conversion B. An endorsement C. A rectification D. An assignment 16. What is the main statute law governing the life insurance business? A. The Civil Law 1972 B. The Insurance Act 1996 C. The Insurance Act 1965 D. The Companies Act 1983 17. The relationship of principal and agent may be terminated by I. Notice of renunciation given to the principal by the agent II. Notice of revocation given by the principal to the agent III. Mutual agreement IV. Death, lunacy or bankruptcy of the principal or agent A. I, II and III B. II, III and IV C. I, II and IV D. I, II, III and IV 18. Following are among the few stages in the consumer buying decision process, except A. Evaluation of alternative policies B. Pre-purchase evaluation C. Problem recognition D. Information search 19. Parties must give consideration before an agreement can be legally binding. In general and life contracts, the consideration to be paid by the insured is termed as A. Cash value B. Money consideration C. Premium D. Cash payment
- 3. Agency Training E&OE 3 20. The Takaful Act 1984 is the source of Takaful legislation in Malaysia. The Act is divided into four parts, including the following: I. Provides for interpretation, classification references to takaful business II. Provides the mode and conduct of takaful business III. Provides for the administration and enforcement of matters such as indemnity, submission of annual reports and statistical returns etc. IV. Specifies powers vested in the Director General of Insurance (DGI) A. I, II B. I, II & IV C. I, II & III D. I, II, III & IV 21. A life insurance policy is a legal contract between A. The agent and the insurer B. The agent and the insured C. The insured and the investor D. The agent and the sub-agent 22. The person to whom the rights are transferred is called ___________; while the person who transfers the rights is called ___________. A. Assignee; assignor B. Assignor; assignee C. Transferor; transferee D. Transferee; transferor 23. Such an authority is deemed to have been exercised by an agent when he/she performs an act which is not within his actual authority, but which later becomes binding on the principal A. Express authority B. Implied authority C. Ratification D. Apparent authority 24. The basic theory to all insurance is that insurance provides a means of meeting an economic loss by A. Transferring the loss B. Sharing the loss C. Assuming the loss D. Preventing the loss 25. In general insurance (excluding marine insurance), insurable interest must exist A. At the time of entering into the contract B. At the time of loss C. At the beginning and at the time of loss D. When marine insurance is involved 26. The principal of indemnity states that A. The insurer should restore the insured to the same financial position as before the loss B. The insurer should restore the insured to a better financial position as before the loss C. The insurer should restore the insured to a lesser financial position as before the loss D. The insured should enjoy indemnity which is less than his loss as a result of policy limitations 27. Which of the following is NOT true about a claim under the principle of subrogation? A. This type of subrogation is considered as arising out of tort B. In the absence of subrogation, the insured cannot get his claim C. In the presence of subrogation, the insured can either claim from the insurer or the negligent party D. The principle of subrogation applies to prevent the insured from making profit out of his loss 28. Which of the following is NOT true about the insurance market? A. An insurance market refers to the facilities of buying and selling insurance B. A propriety company is owned by shareholders and profits earned belong to them C. A co-operative society is owned by shareholders and policyholders which may be termed as a mutual insurer D. The intermediaries in the insurance market are agents and brokers
- 4. Agency Training E&OE 4 29. Assignment of policy can be effected without prior consent of the insurer under the following circumstances except A. Marine Cargo Policies B. Life policies C. Transfer of will D. Aviation 30. A life officer does not accept all application for insurance automatically. They examine all risks carefully. The process of examine is call A. Ascertaining standard B. Adverse selection C. Selection D. Letter of acceptance 31. Which of the followings is the definition of “Void Contract”? A. The contract will remain valid until the aggrieved party exercise the option to treat it void B. Contracts which are unenforceable without being void C. Contracts which are simply one that law held to be no contract at all D. None of the above 32. What do you understand when the organization of a company is said to be decentralized? A. When the preparation of all policies and renewal, etc is carried out in the head office B. When only the preparation of policies and renewal of the policies are come out in the branches concerned C. When there are no branches D. When underwriting, claims and servicing of the branch business are handled at the branches up to a prearranged limit 33. The Malaysia Insurance Institute was formed to A. Promote insurance product of Malaysia B. Encourage people to buy insurance C. Promote insurance professionalism and to conduct professional insurance examination D. A and B above 34. The principle of “utmost good faith” expect the parties A. To disclosure only those material facts on which there are questions B. To answer truthfully only the questions in proposal forms C. To disclose only those which they consider material D. To disclose all material facts of which they are aware of, even if no question is specifically asked 35. In life insurance, the legal consideration for the contract is the A. Payment of renewal premium by the policyholder B. Payment of the initial premium by the applicant C. Release or risk appraisal information by the applicant D. Signing of the application by the proposed insured 36. In the absence of fraud, the statement made by the applicant in the application blanks are considered to be A. Absolute truth B. Disclosure C. Warranty D. Representation 37. The relationship between the insurer and the agent is normally that of A. Master and servant B. Buyer and seller C. Principal and agent D. Employer and employee 38. If no insurable interest existed at the time a policy was taken out, the policy becomes A. Voidable; depending on the judgment of the High Court B. Void; the company is not obliged to pay a claim under the policy C. Voidable; the company may or may not be obliged to pay a claim under the policy depending on the discretion of the management D. Unenforceable; the policy is still recognized by the courts as still subsisting but no claim can be made
- 5. Agency Training E&OE 5 39. The main function of Insurance Mediation Bureau is to A. Provide compensation to victims of motor accidents B. Provide an alternative procedure to resolve disputes arising out of personal insurance policies C. Provide insurance coverage at a reasonable cost to certain classes of vehicles as a kind of social service D. Manage the Unplaced Motor Pool 40. The Insurance Act of Malaysia 1996, is an example of A. Equity Law B. Common Law C. Civil Law D. Statute Law 41. A misrepresentation in a life insurance application is considered to be a material misrepresentation whenever the A. Insurer discovers the misrepresentation after the policy’s contestable period B. Applicant for insurance intentionally makes a misrepresentation C. Representation is not literally true, regardless of its significance D. Misrepresentation is relevant to the insurer’s acceptance of risk 42. In Malaysia, the majority age is A. 21 B. 16 C. 18 D. 17 43. This involves the selection of segments of the market which have been that can be met by the policies developed by the company this function of the Marketing Department refers to A. Planning and controlling B. Market identification C. Product development D. Selection of distribution channel 44. __________is/are part of the insurance market components I. Hospitals II. Agents III. Loss adjusters IV. Reinsurers A. II & III B. I, II & III C. II, III & IV D. I, II, III & IV 45. Insurable Interest should be present in all life insurance contracts. Which one of the following relationships does not create insurable interest? A. Husband and wife B. Creditor and servant C. Master and servant D. Brother and sister 46. When a person applies for insurance on the life of another person, the law requires that the applicant has an insurable interest in the life of the insured at the time that the A. Benefit is paid B. Policy is surrendered C. Application is made D. Insured person dies 47. For life insurance policies, the time when insurable interest needs to exist is A. Before inception of the insurance B. At the inception of the insurance C. After the inception of the insurance D. At the time of claims
- 6. Agency Training E&OE 6 48. The principle of “utmost good fait” means that the parties must disclose A. All material facts of which they are aware B. All material facts of which they ought to be aware C. Only those facts which have been specifically asked for by the company D. Both a and b 49. The incontestable clause in a life insurance policies A. Limits the time during which the policyowner has the right to cancel the policy B. Limits the period during which the insurance company can deny claims on the basis of statements made in the application C. Restricts the insurance company as to the time it can take in the payment of legitimate claims D. Restricts the policyowner as to the time period during which he or she exercise ownership rights 50. A clause which states that no policy after the expiry of two years from the date on which it was effected be called in question by an insurer on the ground that there is misrepresentation made in the proposal for insurance or in any other documents which led to the issue of the policy is called A. Operative clause B. Two year’s clause C. Incontestability clause D. Non-forfeiture clause 51. Minors usually have no capacity to contract, but under the Insurance Act 1963, persons attaining the following age is allowed to contract for a policy A. 14 years B. 16 years C. 18 years D. 21 years 52. A legal transaction which irrevocably transfers all the ownership rights of a life insurance policy from the policyowner to another person is called A. An absolute assignment B. A conditional assignment C. A collateral assignment D. A complete assignment 53. The document containing the written agreement between the policyowner and the insurer is called the A. Proposal B. Letter of acceptance C. Policy D. Application forms 54. A misrepresentation in a life insurance application is considered material if the A. Insurer discovers the misrepresentation after the policy’s contestable period B. Misrepresentation is not literally true, regardless of its significance C. Misrepresentation is relevant to the insurer’s arriving at a decision on the acceptance of the risk D. Same is intentional and made with an intent to deceive the insurer 55. A person effecting a life insurance policy on his own life has an insurable interest which is A. Unlimited B. Limited to his annual income C. Dependent on his state of health D. Dependent on his saving capacity 56. The following statements describe the characteristics of an agency relationship. Which of them is/are true? I. A contract completed by an agent on behalf of the principal is considered to be the contract of the principal II. If it is within an agent’s authority to accept premiums, payment to the agent is deemed as payment made to the principal III. The act of an agent within the scope of his or her authority is deemed to be an act of the principal IV. An agent has fiduciary relationship with his principal A. II, III, & IV B. I, II & IV C. I, II & III D. All the above
- 7. Agency Training E&OE 7 57. It is sometimes said that ‘In insurance, each party to a proposed contract is legally obliged to reveal to the other all information which would influence the other person’s decision to enter into the contract, whether such information is requested or not. This refers to the principle of A. Caveat Emptor B. Uberrimae fides (Utmost Good Faith) C. Insurable Interest D. Contribution 58. The person normally paying the premiums for the policy and retaining all rights, is called the A. Policyowner B. Beneficiary C. Life insured D. Nominee 59. A contract may be discharged by I. Actual performance II. Attempted performance III. Agreement between the parties IV. Financial difficulties A. I & III B. I, II & III C. I, III & IV D. All the above 60. The relationship of insurer and life agent may be created in the following ways I. By express appointment II. By implication of law III. By subsequent ratification of an unauthorized act IV. Under section 44, Insurance Act 1963 A. I & II B. I, II & III C. II, III & IV D. All the above 61. Breach of utmost good faith can occur in the following ways I. By non-disclosure II. By concealment III. By innocent misrepresentation IV. By fraudulent misrepresentation A. I, III & IV B. I, II & IV C. II, III & IV D. All of the above 62. Generally, if a person takes out life insurance on another person’s life, an insurable interest must exist on that person’s life A. At the time of insured’s death B. On the date the insurance becomes effective C. When the premium is collected D. When the policy is issued 63. The purpose of the insurable interest requirement in life insurance contract is to A. Establish that a genuine risk of loss exists at the time of purchase B. Ensure that the beneficiary has an insurable interest in the insured at the time of death C. Reduce the chance that an individual will be over-insured D. Ensured that the insurance company 64. The term “indemnity” represents which one of the following A. Promise to pay B. Insurability C. Insurance for sale D. Insurance risk
- 8. Agency Training E&OE 8 65. A person fails to disclose a material fact willfully, we say he breaches the utmost good faith due to A. Non-disclosure B. Fraudulent misrepresentation C. Concealment D. Innocent misrepresentation 66. Which one of the statements below is considered as true about insurable interest? A. Insurable interest should be present throughout the term of the contract B. Insurable interest can only exist between husband and wife C. A person proposing insurance on another’s life should be so placed as to benefit from the early death of that other person D. A person proposing another’s life would be so placed as to benefit from the continued existence of that person or lose by his early death 67. ________ occurs when incorrect information is given about material fact, but the error is unintentional A. Non-disclosure B. Concealment C. Fraudulent misrepresentation D. Innocent non-disclosure 68. The moral and legal contractual duty to disclose all material facts is known as A. Principle of utmost good faith B. Principle of Caveat Emptor C. Breach of contract D. Moral and physical responsibility 69. Any error contained in an application for life insurance becomes the responsibility of A. The insurer B. The agent C. Either the agent or the proposer depending on the insurer’s decision D. The proposer 70. The following are classified as breach of “utmost good faith” except one A. Non-disclosure B. Concealment C. Fraudulent misrepresentation D. Innocent non-disclosure 71. An agency can be terminated by the following acts except one A. Non-disclosure B. Concealment C. Fraudulent misrepresentation D. Innocent non-disclosure 72. In contract law, a statement of fact which is made a part of the contract itself and which must be exactly true if the contract is to be valid is known as A. An affidavit B. An affirmation C. A representation D. A warranty 73. An agent is said to have authority to transact the business of the principal even though the authority is not expressly granted. Such authority is referred to as A. Collateral authority B. Absolute authority C. Apparent authority D. Implied authority
- 9. Agency Training E&OE 9 74. What is a key-man insurance A. It is insurance purchased by a firm to protect itself against financial losses caused by the death or disability of a key employee B. It is insurance purchased by an important employee in an organization to protect himself against any loss of employment C. It is an insurance plan which provides for the payment of annual income to a key employee after retirement D. It is an insurance plan which provides benefits for a large group of key employees 75. In the law of agency, a principal is defined as a person who A. Is the head of the company B. Has authorized another person to act on his or her behalf in the creation of contract C. Is given the power to effect contracts with third parties D. Holds a legal title to properties for the benefits of a third person 76. The principle of “Caveat Emptor” means A. Protect the seller B. Let the seller beware C. Utmost good faith D. Let the buyer beware 77. Pursuant to the Age of Majority Act, 1974, the age of majority is A. 16 B. 17 C. 18 D. 21 78. A legal transaction that transfers only some of a life insurance policy’s ownership rights conditionally to the assignee is called A. Collateral assignment B. Absolute assignment C. Irrevocable assignment D. Conditional assignment 79. The principle of “utmost good faith” expect the parties A. To disclose only those material facts on which there are questions B. To answer truthfully only the questions in the proposal form C. To disclose only those questions which they consider material D. To disclose all material facts of which they are aware of, even if no question is specially asked 80. An agent is deemed to be an agent of the proposer if A. He delivers the policy contracts on behalf of the insurer B. He transfers the premium collected to the insurance company C. He completes an application form on behalf of the proposer D. He advises the proposer on the needs for the life insurance 81. What are the duties of an insurance agent? I. To exercise judgement is selecting clients for the company he represents II. To provide information to the consumer, explaining the features of the coverage provided in the insurance contract III. To provide services to client before and after losses have occurred IV. To motivate prospects to take up a life insurance policy by outlining the needs for financial protection for him and his family A. I, II & III B. I, III & IV C. II, III, IV D. All of the above
- 10. Agency Training E&OE 10 82. The authority of an agent can be classified into I. Express authority II. Implied authority III. Usual authority IV. Apparent authority A. I & II B. I & III C. I, II & IV D. All of the above 83. Generally, the owner of an existing life insurance policy can effectively transfer all policy ownership rights to another person by A. Naming the person as the revocable beneficiary of the policy B. Allowing the policy to lapse and having it reinstated in the new owner’s name C. Making an absolute assignment of the policy to the other person D. Naming that person as trustee of the policy 84. Insurance Industry in Malaysia is governed by an Act of Parliament. Name the Act. A. Insurance Ordinance 1963 B. Insurance Act 1996 C. Road Traffic Ordinance 1963 D. Insurance Regulation 1963 85. The tendency of persons with a greater likelihood of loss to apply for life insurance is called A. Impairment B. Persistency C. Anti-selection D. Selective purchase 86. All of the followings are true about insurable interest EXCEPT A. A person effecting a life insurance policy must have an insurable interest in the life to be assured B. Insurable interest must be present at the time the contract is made C. It is not necessary to prove insurable interest at the time of death D. Insurable interest means that each party to a contract is legally obliged to reveal to the other all information which would influence the other’s decision to enter into the contract whether such information is requested or not 87. Which one of the following is NOT an important consideration in the normal underwriting or selection of risk? A. Physical hazard B. Moral hazard C. Over-insurance D. Under-insurance 88. If an agent comes across a substandard case during prospecting he should A. Disclose his findings to the life company B. Explain to the prospect that his proposal for life insurance may be rejected or accepted at a higher cost C. Encourage his prospect to disclose all facts fully and truthfully D. All of the above are correct 89. Over-insurance means A. A person purchased policies from too many companies B. A person purchased too many policies from one company C. A person has the capacity to pay the premiums for his policy/policies D. A person does not have the capacity to pay the premiums for his policy/policies 90. A life insurance agent is granted the authority to A. Accept initial premiums B. Reword the contract provisions to meet an applicant’s needs C. Approve a medical application’s needs D. Bind the applicant to a contract with an insurance company
- 11. Agency Training E&OE 11 91. In return for an investor’s promise to pay the benefit if an insured should die while a life insurance policy is in force, the policyowner gives as legal consideration the A. Application only B. Application and initial premium only C. Initial and renewal premium only D. Application, initial and renewal premium only 92. Measurement of the incidence and severity of sickness and accidents which may be expected to occur in a predefined group of persons are known as A. Mortality rates B. Morbidity rates C. Survivorship rates D. Probability rates 93. An agent A. Has the authority to tell a proposed insured that a policy will be issued by the insurance company as requested B. Has the authority to approve all statements made by the proposed insured on the application C. Should verify all statements made by the applicant on the application D. Should notify the proposed beneficiaries once the application is made 94. The receipt for the first premium is called the A. Temporary Receipt B. Conditional Receipt C. Initial Receipt D. Provisional Receipt 95. The ‘days of grace’ is A. A period of time after the maturity date during which a policy remains in force without penalty even though the premium due has not been paid B. A period of time after the premium due date during which a life policy remains in force without penalty even though the premium due has not been paid C. A period of time on which an insurance policy goes into effect once the initial premium is paid D. A period of time which a policyholder could lodge a complaint with the Director – General of Insurance 96. The companies transacting insurance business in Malaysia can be classified as I. General insurance companies II. Life insurance companies III. Holding companies IV. Composite companies A. I & II B. I, II & III C. I, II & IV D. All of the above 97. Life insurance agents are expressly authorized to perform the following actions I. Approve the application of a proposed insured II. Solicit life insurance III. Accept an initial premium and issue a receipt on behalf of the insurance company IV. Waived the insurable interest requirement A. II only B. II & III C. I & II D. All of the above 98. Which of the following are classified as after sales service? I. Policy delivery II. Reinstatement of policy III. Claims IV. Rebating A. I & II B. II & III C. I, II & III D. All of the above
- 12. Agency Training E&OE 12 99. In recommending a life insurance contract to a prospective client, the agent should be able to explain completely I. What policy will do, i.e. the benefits payable in the event of claim II. How much the coverage costs, i.e. the premium III. When the coverage goes in force, i.e. the policy date effective IV. Anything the policy does not cover, i.e. any exclusion A. I, II & III B. I, III & IV C. II, III & IV D. All of the above 100.To discontinue a policy or to have a policy made paid-up and then to effect a new one in another company or the same company is called A. Twisting B. Rebating C. Underwriting D. Prospecting SAMPLE QUESTIONS FOR PCE SET 1 SUGGESTED ANSWERS 1.C 21.C 41.D 61.D 81.D 2.D 22.A 42.C 62.B 82.D 3.D 23.C 43.B 63.A 83.C 4.D 24.B 44.D 64.A 84.B 5.B 25.C 45.D 65.C 85.C 6.D 26.A 46.C 66.D 86.D 7.D 27.B 47.B 67.D 87.D 8.A 28.C 48.D 68.A 88.D 9.D 29.D 49.B 69.D 89.D 10.A 30.C 50.C 70.D 90.A 11.D 31.C 51.B 71.A 91.C 12.A 32.D 52.A 72.C 92.B 13.B 33.C 53.C 73.D 93.C 14.D 34.D 54.C 74.A 94.B 15.D 35.B 55.A 75.B 95.B 16.B 36.D 56.D 76.D 96.C 17.D 37.C 57.B 77.C 97.A 18.B 38.C 58.A 78.D 98.C 19.C 39.B 59.B 79.D 99.D 20.C 40.D 60.D 80.C 100.A
- 13. Agency Training E&OE 13 SAMPLE QUESTIONS FOR PCE SET II 1. Mr. Lim lapses his whole life insurance policy after paying premiums for three years and does not elect a nonforfeiture option. In such case, A. The insurer would automatically send him a cheque for the cash value of the policy B. Mr. Lim loses his right to the nonforfeiture values C. An automatic nonforfeiture option specified in the contract would go into effect D. Mr. Lim would receive interest on the cash value until he makes an election 2. Which of the following is a special feature of a reducing term assurance? A. The death benefit fluctuates each year B. The death benefit is constant throughout the policy year except the last C. The death benefit decreases each year until there is no amount left at the end of the term D. The cash value of the policy decreases as the net amount at risk decreases 3. Encik Zainal owns a whole life policy which has been in forced for 7 years. The annual premium was due on February 7, 1987. It was subsequently paid on April 6, 1987. The amount Encik Zainal paid was A. The annual premium due plus interest for the period of February 7 to April 6, 1987 B. The annual premium due C. The annual premium due plus reinstatement fee D. The annual premium due plus interest for the period of March 7 to April 6, 1987 4. What is the advantage of buying a life insurance policy at a younger age? A. Medical examination is totally exempted in all cases B. Non-smoker discount is higher in all cases C. The claim will be paid faster D. Total premium paid will be less when compared to an older person 5. After the expiration of the “Incontestability” period the insurer can still repudiate the claim under the following circumstances A. When the contract is breached B. When fraud is proved C. When the insurer was misled D. When concealment of fact is proved 6. The maturity proceeds of a life insurance policy A. Are taxable under Income Tax Act B. Are taxable under Real Property Gains Tax C. Are taxable under Estate Duty Enactment D. Are not taxable 7. Certain whole life insurance policies are called limited payment policies “Limited payment” refers to A. Number of beneficiaries to whom the proceeds are paid B. Period during which premium are payable C. Manner in which benefit are paid D. Payment of death claims by the insurer is limited by the frequency of the premium paid by the insured 8. The accumulation of excess premium paid in earlier years to support payment of future benefits in later years is called the A. Common fund B. Reserve C. Investment fund D. None of the above 9. Joint life insurance can be granted to the following A. Husband and wife only B. Business partners only C. Lives of more than one person, each having an insurable interest on the other lives D. None of the above 10. Discount to the premium chargeable to female lives are usually granted because A. The income of female is usually smaller B. Females tend to have less sickness than males C. Females mortality rate is lower D. Females cannot afford higher premium
- 14. Agency Training E&OE 14 11. In the transaction of life business, the insurer are no risk A. As soon as a letter of acceptance is issued B. As soon as a letter of acceptance is issued and received by the proposed insured C. As soon as a letter of acceptance is issued and the first premium is paid D. As soon as a letter of acceptance is issued and the first premium is paid and accepted by the office of the insurer 12. Mr. Tan purchased a participant life insurance policy. As a direct result of such a purchase Mr. Tan is entitled to A. Owned common stock in the insurance company B. Share in the insurance company surplus from operation C. Waive insurability requirement D. Request for a higher loan amount from the insurance company 13. The renewal provision in a term life policy usually allows the policyholder to renew the coverage for an additional period of time A. At an increased premium, provided he is still insurable B. At an increased premium without evidence of insurability C. At the same premium, provided he is still insurable D. At the same premium, without evidence of insurability 14. Substandard cases refer to A. Cases in which the premium charged is not standard but charged from time to time B. Cases in which the applicant pay slightly lower premium than average C. Cases where insurance is obtainable but for an extra premium D. Cases when only smaller sums will be insured 15. The risks covered by life insurance which is often referred to as economic death A. Premature death B. Permanent disability C. Temporary disability D. Retirement benefit 16. The long-term nature of the life insurance contract requires the insurer to adopt a cautions view of the below factors which enter into the premium rate calculations I. Mortality II. Expenses III. Rate of investment returns IV. Tax A. I, II & III B. I, II & IV C. II, III & IV D. All of the above 17. To have the existence of ____________, the purchase of a life insurance policy must stand to suffer a financial loss on the death of the insured A. Uberrimae fides B. Insurable interest C. Utmost good faith D. Proximate cause 18. In life insurance, the claim amount is determined at the very beginning of the contract. Such contract is ________contract. A. Indemnity B. Aleatory C. Subrogation D. Proximate 19. If the owner of a whole life insurance policy which has been in forced for a long time decides to terminate his coverage and stop making premium payments, he will be entitled to the A. Interest earned on the invested portion of the premium paid B. Total amount of premium paid C. The face amount of the policy D. Cash value of the policy, as stated in the contract
- 15. Agency Training E&OE 15 20. The major responsibility of the underwriting department of a life insurance company is to A. Compile mortality table B. Formulate terms of insurance contract C. Calculate premium rates for different classes of insured D. Evaluate risk classifications of applicants 21. Premium rates are higher in the early policy years in order to avoid an increase in the premium in the later years. This premium system is known as the A. Natural premium system B. Modified premium system C. Level premium system D. Graded premium system 22. Extra premium paid is removable in respect of A. Disability extra B. Mortality extra C. Moral extra D. Non of the above 23. The clause that normally appears at the end of the first page of the policy and signed by an authorized person of the insurance company is called A. Proviso clause B. Operative clause C. Contract clause D. Attestation clause 24. The main objective under a Children’s Deferred policy is A. To provide for the school education of the child B. To provide for the medical expenses of the child C. To provide for the future life insurance needs of the child D. To provide for the funeral expenses in case of early death of the child 25. What is convertible term insurance? A. These are term insurance where there is an option for renewal of policies B. These are term insurance giving an option to convert to whole life or endowment insurance during the term of the policy without further medical examination C. These are term insurance where medical examination is needed D. These are term insurance which can be converted to group policies 26. A policy which shares in the company’s divisible surplus is called A. Permanent policy B. Participating policy C. Non-participating policy D. Temporary policy 27. These are certain disadvantages in twisting a life policy. Stated below are some of the disadvantages faced by the client EXCEPT one: A. Suicide clause begins anew B. Incontestable clause begins anew C. The accumulation of cash value begins anew D. The agent earns more commission 28. When a suicide clause is included in a life policy, it is usual for life officers to pay one of the following when the insured commits suicide within the exclusion period A. The face amount B. The face amount less 1 year premium C. The return of premiums only with interest D. The return of premiums only 29. A life insurance claim is not payable if A. There is a misstatement of the insured’s age B. There is a material misrepresentation in the application form C. The beneficiary cannot produce letters of administration for the deceased’s estate D. The insured dies before the maturity date of the policy
- 16. Agency Training E&OE 16 30. Under whole life policies, it is usual for cash value to be only available after A. 1 year B. 2 years C. 3 years D. 5 years 31. The “burden of proof” for claims made under a life policy in a suicide case is laid upon the A. Court B. Claimant C. Doctor D. Insurer 32. Jerry Foong made a proposal for a policy on his own life and received a letter of acceptance stating that the policy would be issued on payment of the premium, but before the insurer issued the policy document. Jerry Foong died in a car accident. The insurer had to pay the claimant A. The premium that had been received B. The sum assured C. The surrender value D. Nothing 33. In life insurance, the term “supplementary contract” generally refers to a separate contract made at the time of A. Claim settlement B. Policy issue C. Policy assignment D. Application 34. Life insurance is the most practical means of meeting one’s financial obligations arising from an individual’s premature death because ___________ A. It creates an immediate estate B. It always provides the most money C. It is more accessible than savings or stocks D. It earns the greatest interest 35. One difference between individual life insurance and group life insurance is that a person who is insured under a group life policy is not permitted to A. Convert the policy B. Select the amount of coverage he and she will have C. Change the beneficiary after the policy is in force D. Name any beneficiary he or she wishes 36. In life insurance, the word “loading” generally refer to the A. Cash value of the policy B. Extra premium charged for special riders or benefits C. Amount which is added to net premiums to provide for the insurance company’s expenses and possible fluctuations in claims or interest rates D. Extra interest amount which is earned by the insurance company 37. The characteristic of a paid-up policy are: I. The sum assured is reduced and payable under the same circumstances as the original policy II. No more premiums need to be paid III. The bonuses already declared remain attached and the policy usually becomes non-participating IV. The policyholders would need to furnish proof of insurability to the insurance company A. I & II B. I, II & III C. II, III & IV D. All of the above 38. In the underwriting of life insurance policies, which of the following factors will influence the assessment of risk? I. The proposer’s physical condition II. The proposer’s medical history III. The proposer’s family medical history IV. The proposer’s occupation
- 17. Agency Training E&OE 17 A. I, II & III B. I, II & IV C. II, III & IV D. All of the above 39. The major differences between a whole life policy and an endowment policy are I. Whole life premiums are generally II. Endowment policies are of shorter duration III. Cash value take a longer time to build up a whole life plan IV. Endowments are for savings only A. I & II B. I & III C. II & III D. II & IV 40. Age of the life assured is an important factor in determining I. Whether an insurance policy can be granted to a person II. The type of evidence of health required III. Whether a policy loan can be granted IV. The rate of premium to be charge A. I, II & III B. I, II & IV C. II, III & IV D. All of the above 41. The purpose of underwriting is generally I. To ensure that the standard of longevity of the persons insured compares favorably with those indicated in the mortality table used II. To increase the volume of business secured III. To maintain equity amongst the policyholders in regard to the rate of premium charged in conformity with the degree of risk presented IV. To avoid anti-selection A. I, II & III B. I, III & IV C. II, III & IV D. All the above 42. Choose the correct combination of the following statements I. No loan can be advanced during the first year of the policy duration II. Loans can be granted under a temporary insurance III. Surrender value should always be less than the loan value IV. A loan taken against a policy need not be repaid A. I & II B. I & III C. I & IV D. III & IV 43. Which of the following are TRUE about the over statement of age? I. The policy will become null and void due to the breach of utmost good faith II. The beneficiary of the insured is entitled to the face amount of the policy, plus a refund of the excess premium paid III. Policy proceeds will be adjusted in accordance with the provision of the Insurance Act 1996 A. I & II B. I & III C. II & III D. Non of the above 44. The applicant for life insurance policy usually has a choice with respect to some of the provisions and privileges that will be included in the policy he or she will receive. Typically, the applicant has a choice as to I. Whom the policy proceeds are to be paid II. How the dividend, if any, are to be used or applied III. How frequently premiums are to be paid IV. Whether a reinstatement privilege is to be included
- 18. Agency Training E&OE 18 A. I & III B. II, III & IV C. I, II & III D. All of the above 45. Which of the following are features of a Children’s Deferred Assurance policy? I. It does not cover any death risk on the child’s life before the child reaches the vesting age II. Medical examination of the parent effecting the insurance is necessary in all cases III. It is effected by a parent on the life of a child with the intention that the policy should vest in the child on his attaining a specified age A. II & III B. I & III C. I & II D. All of the above 46. The following are true about the characteristics of a life insurance contract I. It is a contract of utmost good faith II. It is an unilateral contract III. It is an executory contract A. I & II B. I & III C. II & III D. All of the above 47. Which of the following are non-forfeiture provisions? I. Surrender cash value II. Paid-up insurance III. Automatic premium loan IV. Reinstatement pf policy A. I, II & III B. II, III & IV C. I, II & III D. All of the above 48. Normally, life insurance companies gives discount for the following I. Substandard risk II. Non-smoker III. Large sum assured IV. Better-than-average risk A. I & III B. II & III C. I & IV D. All of the above 49. Which of the following are taken into account in the calculation of tabular premiums? I. Expenses II. Rate of survival III. Rate of interest IV. Rate of mortality A. I, II & III B. II, III & IV C. I, III & IV D. All of the above 50. Under the following, which policy is suitable for persons with small income for the present but with good prospects for the development of a successful career? A. Renewable Term Insurance B. Decreasing Term Insurance C. Ordinary Life Policy D. Anticipated Endowment Insurance
- 19. Agency Training E&OE 19 51. Which of the following is NOT true about different types of life policies? A. There is no “forced saving” element in term insurance B. Upon conversion of a term insurance, the premium rate for the converted policy is based on the original age or the attained age of the Life Assured C. Annuities are mainly bought by older people, seeking to convert capital, e.g. from gratuity fund, into an income for life. D. None of the above 52. Permanent Health Insurance provides such benefit as A. Income during periods of sickness or disability B. A lump sum payment on the diagnosis of any specified diseases which affects health of life assured C. A lump sum payment on any sickness incurred on the life assured D. Income equal to the insured’s earnings during periods of sickness or disability 53. Which of the following is true about personal accident benefit? A. Bodily injury does not include nervous shock, bruising or organic injury B. Internal injury caused by external means is sufficient to give rise to a valid claim C. Accident caused by suicide, self-injury, drugs and alcoholism will only be eligible to 50% of the sum payable D. Air travel is excluded in the personal accident cover 54. The joint life policy A. Can be issued under whole life, endowment and term policies B. Only pays out when all the lives of business partners C. Can be issued on the lives of business partners D. Continues following the first policy proceeds on the death of the joint lives 55. Part of the Takaful installment made by participants and credited by the company into the Participant’s Account (PA) is for A. Savings and tabaruk B. Savings and investments C. Investments and risk fund D. Investments and tabaruk 56. The advantage of the waiver of premium under a Children’s Deferred Policy is that A. Premiums are waived upon the death of the parent B. Premiums are waived when the child reaches vesting age C. Premiums are waived upon the death of the parent and are payable again D. Premiums are waived if the child dies before reaching vesting age 57. The premiums charged for the following policies are entitled to tax relief except A. Life policy B. Endowment policy C. Term policy D. Personal accident policy 58. The document containing the written agreement between the policyowner and the insurer is called the A. Proposal form B. Letter of acceptance C. Policy D. Fully completed application form 59. In Malaysia, the system of premium payment normally used is A. One lump sum payment system B. Natural payment system C. Level payment system D. Standard payment system 60. Under the following, which is the most difficult factor to be assessed by the underwriter as for risk assessment purposes? A. Condition of health B. Physical hazard C. Moral hazard D. Occupation hazard
- 20. Agency Training E&OE 20 61. Mr. Chan bought a life insurance policy; he is still alive when the policy matured. The payment that he will be receiving is defined as A. Death claims B. Alive claims C. Maturity claims D. Bonus claims 62. Generally, a policyholder has the right to make a beneficiary designation A. Only on the date when the premium is due B. Only at the time as the application is submitted C. Only the policy anniversary date only D. At any time while the person whose life is insured is still living 63. Before any claim payment is made during maturity claim, which one must be produced? A. The policy document B. Income Tax statement C. Estate duty certificate D. Doctor’s medical statement 64. The section of the policy where the date of proposal, name and address of the assured, premium amount and age of the life assured are found is known as A. Proviso B. Schedule C. Heading D. Preamble 65. The provision which states that the policy shall not lapse for non-payment after it has acquired a cash value, and that the policy will be converted to a free policy is called A. Automatic extended term insurance B. Automatic paid-up clause C. Automatic premium loan D. Renewal option 66. The surrender value is A. The cash paid to policyholders who surrender their policies after 3 years B. Guaranteed for all policies C. Determined arbitrarily by the insurer D. Not similar to the cash vale 67. Mr. Wong owns a whole life insurance policy which has been in forced for a long time. If he decides to determine his coverage and stops making premium payments, he will be entitled to the A. Face value of the policy B. Cash value of the policy C. Total amount of premium paid D. Interest earned on the invested portion of the premium paid 68. For children’s insurance, the main deference between a Protected Educational Policies and Children’s Deferred Assurance is A. For Protected Educational Policies, the policy is issued on the life of the parent; for Children’s Deferred Assurance, the policy is issued on the life of the child B. For Protected Educational Policies, the policy is issued on the life of the child; for Children’s Deferred Assurance, the policy is issued on the life of the parent C. For Children’s Deferred Assurance, if the parent’s death occurs during the term, the premium cease to be payable D. For Protected Educational Policies, the premiums are expected to be paid throughout the term, even if the parent happens to die before the policy vests in the child 69. Simon died as the result of illness five years after a whole life policy on his life was issued. It was then discovered that his age has been overstated by four years on the insurance application. In this case, the beneficiary of the policy would receive A. An amount equal to the total of the premium Simon paid B. No payment C. The face amount of the policy plus the amount of over-payment of premium D. The cash value of the policy only
- 21. Agency Training E&OE 21 70. In the event of death of the assured after the date of maturity of a policy, but before receiving the policy proceeds, the claim should be treated as A. Maturity claim B. Death claim C. Fraudulent claim D. Bonus claim 71. A lapsed policy is one for which the A. Policyowner has failed to make the premium payment during the policy period B. Premium has not been made during the last 30 days of the policy period C. Policyowner has failed to make the premium payment within the grace period D. Policyowner has failed to meet all of the legal requirements as set forth by the Insurance Act, 1996 72. After a policy has been allowed to lapse, the insured is given an opportunity to renew it if certain conditions are met. The opportunity to renew a lapsed policy is called the A. Reinstatement provision B. Incontestable provision C. Lapsation provision D. Amendment provision 73. For life insurance policy, a creditor having an insurable interest in his debtor’s life can effect a valid insurance on the life of the debtor concerned. The maximum sum assured is A. 1/3 of the debt B. 2/3 of the debt C. The total debt amount D. No limit 74. Which of the following are features of a reduced paid-up policy? I. Sum Assured decreases II. No need to pay anymore premium III. New riders can be added IV. Cannot change beneficiary A. I & III B. I & II C. I, III & IV D. All the above 75. The age of the person to be insured is usually stated in the proposal form. This is important for the following reasons: I. To determine the rate of premiums to be charged II. To ascertain if the insurance can be granted to the applicant. If so, the appropriate amount to be provided III. To determine whether medical evidence is required. If it is required, the type of medical evidence IV. To determine whether policy loans could be advanced to the life assured A. I & II B. I & III C. I, II & III D. All of the above 76. Information relating to the date of birth, occupation and type of policy plan applied for is generally obtained from A. The Agent’s Report B. The Employer C. The Medical Declaration form D. The proposal Form 77. When a policy is cancelled prematurely, it will mean A. A gain to the insurer B. A loss to the insurer and the policyholder C. A gain to the policyholder D. A gain to the agent
- 22. Agency Training E&OE 22 78. When the policy has become lapsed, the agent should suggest A. Reinstatement of the lapsed policy B. Discontinuance of the policy C. Purchasing a new policy D. Refund of full premium paid For questions 79 and 80, please refer to the following information (i) Date of birth of life insured: 1st October 1957 (ii) Date of commencement of policy – 1st June 1985 79. Calculate the age nearest birthday of the life assured at the time when the policy starts to commence? A. 27 B. 28 C. 29 D. 26 80. What is the age-next-birthday of the life assured at the commencement date of the policy? A. 26 B. 27 C. 29 D. 28 81. If the date of birth of a person falls on December 1, 1941,and he purchased a life insurance policy on July 1, 1984. What is his age at the next birthday? A. 43 B. 33 C. 45 D. 44 82. The requirements for proof of age may differ from one company to another. However, there are certain common proofs which may ordinarily be accepted by the life office. These are I. Birth Certificate II. Photocopies of identity card III. Passport IV. School certificate A. I & III B. I, II & III C. I, III & IV D. All of the above 83. The most important service which an agent and the company is expected to provide is to help in the prompt settlement of claims. Some of the claims that can arise from the life insurance contracts and the attached riders are I. Accident claims II. Hospitalization claims III. Death claims IV. Maturity claims A. I & III B. I, II & IV C. II, III & IV D. All of the above 84. The duration of the grace period of a life insurance policy is determined by the A. Amount of premium paid B. Type of policy plan C. Frequency of the premium payment D. Value of the sum assured 85. Once a policy has lapsed, the insured usually can reinstate the policy provided A. Proof of insurability is shown, all back premiums due plus interest have been paid B. Proof of insurability is shown, all back premiums due have been repaid C. Proof of insurability is shown, all back premiums due plus loan taken have been repaid D. Proof of insurability is shown, all back premiums due, loan taken plus interest have been repaid
- 23. Agency Training E&OE 23 86. The following are true about the misrepresentation of age, except one A. Age is understated B. The sum assured would be adjusted corresponding to the true age C. Age is overstated D. The excess premiums would not be refunded 87. The surrender value is A. The cash paid to policyholders who surrender their policies after 3 years B. Guaranteed for all policies C. Determined arbitrarily by the insurer D. Not similar to the cash value 88. It is condition and privilege that a life policy will not lapse if the renewal premium is paid within I. 15 days of the premium due date in the case of monthly premium II. 30 days of the premium due date in the case of all other modes of payments A. I B. II C. I & II D. None of the above 89. Lapsation can be caused by the following, except one:- A. Over-insurance B. Misrepresentation C. Twisting D. Under-insurance 90. In maturity claims, the settlement options are to I. Accept the maturity proceeds in cash II. Convert the maturity cash value into a paid-up whole life policy III. Surrender the policy proceeds to the life company A. I B. II C. I & II D. All the above 91. If a new mode of payment calls for less frequent payments, the total annual premium paid by the Policyowner will A. Increase B. Decrease C. Remain the same D. Vary 92. Which one of the following is true? A. A policy will acquire cash value after 2 years B. A policy will acquire cash value after 6 years C. A policy with cash value will lapse after the grace period D. A policy without a cash value will lapse after the grace period 93. Mr. Chan died during the grace period of his life insurance policy without having paid the premium due. The beneficiary of his policy is entitled to receive A. Only a return of the premiums paid on the policy B. The full policy benefit C. The policy benefit, minus the unpaid premium D. Nothing 94. Mr. Goh had joined the Malaysian Air Force 3 weeks before he purchased a RM20,000 10-year non-participating Endowment policy on his life. The policy contained an “exclusion of war” clause. After two years, while on leave from active duty, Mr. Goh was killed in an aeroplane accident on his way to Singapore. In this situation, Mr. Goh’s beneficiary is A. Not entitled to any payment B. Entitled to the face amount of the policy C. Entitled only to an amount equal to the premium paid D. Entitled to return of premiums with interest thereon at market rate
- 24. Agency Training E&OE 24 95. The incontestability clause in life insurance policy A. Limits the time during which the Policyowner has the right to cancel the policy B. Limits the period during which the insurance company can delay claims on the basis of statements made in the application C. Restrict the insurance company as to the time it can take in the payment of legitimate claims D. Changes the term under the contract 96. After the policy has been allowed to lapse, the insured is given an opportunity to renew it if certain conditions are met. The opportunity to renew a lapsed policy is called the A. Reinstatement provision B. Incontestable provision C. Lapsation provision D. Non-forfeiture provision 97. The three essential requirements for settlement of death claims are I. Proof of death II. Proof of age III. Proof of estate IV. Proof of title and ownership at death A. I, III & IV B. II, III & IV C. I, II & IV D. All of the above 98. A policyholder should submit acceptable documentary evidence as proof of age, as early as possible because A. The life company will not recognize any proof of age during the processing of a death claim B. It is often easier for the policyholder to produce the necessary proof when he or she is still alive C. Any misrepresentation of age will result in cancellation of the policy D. The insurer will refuse to release the agent’s commission until satisfactory proof of age is submitted 99. Some of the causes of lapsation are I. The policyholder purchased the policy due to high pressure sales by the agent instead of being convinced of the need for insurance II. The type of policy selected was not the best suited to the needs of the policyholder III. The policyholder was not given full and complete information about the contract IV. Wrong or misleading information is given by a competing agent A. I, II & III B. II, III & IV C. I, III & IV D. All the above 100.The beneficiary of the insurance policy which has an outstanding policy loan at the death of the insured will receive from the insurance company A. Only an amount equal to the premium paid B. The cash surrender value of the policy minus the amount of the outstanding loan C. The full death benefit D. The death benefit minus the amount of the outstanding loan
- 25. Agency Training E&OE 25 SAMPLE QUESTIONS FOR PCE SET II SUGGESTED ANSWERS 1.C 21.C 41.B 61.C 81.A 2.C 22.D 42.C 62.D 82.D 3.A 23.D 43.C 63.A 83.D 4.D 24.C 44.C 64.B 84.C 5.B 25.B 45.B 65.A 85.A 6.D 26.B 46.D 66.A 86.D 7.B 27.D 47.A 67.B 87.A 8.B 28.D 48.B 68.A 88.C 9.C 29.B 49.C 69.C 89.D 10.C 30.C 50.A 70.A 90.C 11.D 31.B 51.D 71.C 91.B 12.B 32.B 52.A 72.A 92.D 13.B 33.D 53.B 73.C 93.C 14.C 34.A 54.C 74.B 94.B 15.B 35.B 55.B 75.C 95.B 16.D 36.C 56.C 76.D 96.A 17.B 37.B 57.D 77.B 97.C 18.B 38.D 58.C 78.A 98.B 19.D 39.A 59.C 79.B 99.D 20.D 40.B 60.C 80.D 100.D