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c. underwriting
d. risk assumption
e. loss control
41. Which of the following leads to the payment of a higher insurance premium by the potential insured?
a. Job promotion of the potential insured
b. High-paying career of the potential insured
c. Obesity of the potential insured
d. Childbirth in the family of the potential insured
e. Wedding of the potential insured
42. Term life insurance is characterized by:
a. level annual premiums throughout one’s life.
b. lower initial premiums than other types of insurance.
c. permanent coverage for young applicants.
d. non-convertibility.
e. cash value accumulation.
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43. A(n) _____ policy is a type of term insurance.
a. straight term
b. whole life
c. increasing term
d. variable term
e. risk assumption
44. A(n) _____ provision enables you to purchase the policy again at its expiration.
a. reward
b. renewable
c. loss prevention
d. limited risk
e. arbitration
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b. Cash value lower than the death benefit
c. Absence of a savings feature
d. Fixed premiums and protection levels
e. Lighter fees than other insurance policies
48. Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy, he will
receive the cash value. His plan is a _____ policy.
a. term life
b. continuous whole life
c. limited payment whole life
d. viatical life
e. group life insurance
49. Group life insurance is a(n):
a. term policy designed to pay off the mortgage balance in the event of the borrower’s death.
b. insurance that is sold in conjunction with the sale of a group of assets.
c. insurance in which benefits are a function of the returns being generated on the investments selected by the
policyholder.
d. insurance that provides a master policy for a group.
e. insurance that issues many master policies for an insured.
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50. Universal life insurance is:
a. a deferred premium payment policy.
b. primarily sold to college students.
c. a combined savings/investment plan and insurance policy.
d. a provision for a secondary beneficiary.
e. less expensive than other policy types.
51. _____ can be both an advantage and a disadvantage of universal life insurance.
a. Flexible premiums
b. Tax features
c. High returns
d. Unbundling premiums
e. Underwriting
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52. The death benefit of a(n) _____ life insurance policy may go down because of poor investment returns.
a. limited payment
b. whole
c. variable
d. group
e. industrial
53. _____ is a relatively expensive type of decreasing term life insurance.
a. Group life
b. Credit life
c. Industrial life
d. Home service life
e. Whole life
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56. Which of the following types of insurance policies provides temporary coverage for a set period?
a. Universal life insurance policy
b. Whole life insurance policy
c. Variable life insurance policy
d. Term life insurance policy
e. Extended life insurance policy
57. It is advisable to purchase life insurance from an insurance company that has been in business for at least _____ years.
a. 5
b. 10
c. 19
d. 15
e. 25
58. Sales commissions and marketing expenses can increase the costs of a fully loaded _____ policy.
a. term life insurance
b. whole life insurance
c. universal life insurance
d. variable life insurance
e. mortgage life insurance
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59. Which of the following represents a disadvantage of a whole life insurance policy?
a. It is difficult to evaluate the true cost of a whole life insurance policy at the time of purchase.
b. A whole life insurance policy provides only temporary coverage for a set period.
c. A whole life insurance policy may require a policyholder to pay higher premiums when the policy is renewed.
d. A whole life insurance policy often provides lower yields than other investment vehicles.
e. A whole life insurance policy does not provide any tax advantages on accumulated earnings.
60. It can be difficult to evaluate the true cost of a _____ policy at the time of purchase.
a. term life insurance
b. whole life insurance
c. universal life insurance
d. variable life insurance
e. mortgage life insurance
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61. Which of the following statements regarding a good insurance agent is true?
a. The agent is aggressive while pursuing business from the potential insured.
b. The agent is recommended by professionals like bankers and attorneys.
c. The agent charges high commissions for providing insurance coverage.
d. The agent replies with fancy buzzwords and generic answers to questions.
e. The agent is the first one to solicit the potential insured’s patronage.
62. The settlement option chosen by most policyholders is:
a. lump sum.
b. interest only.
c. fixed amount.
d. fixed time.
e. life income.
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63. A grace period permits a policyholder to retain full death protection even though the premium has not been paid for:
a. 12 months.
b. 6 months.
c. 3 months.
d. 50 days.
e. 31 days.
64. Marilyn Simms died with a $200,000 life insurance policy. Her husband, Jack, is the primary beneficiary, and their
children, Mimi (age 24) and Ann (age 30), are the contingent beneficiaries. All three survive Marilyn. How will the policy
proceeds be distributed?
a. $200,000 to Jack
b. $100,000 each to Mimi and Ann
c. $100,000 to Jack and $50,000 each to Mimi and Ann
d. $66,666 each to Jack, Mimi, and Ann
e. $150,000 to Jack and $25,000 each to Mimi and Ann
65. Which of the following policy features allows the insured to increase coverage periodically without showing proof of
insurability?
a. Multiple indemnity clause
b. Guaranteed purchase option
c. Disability clause
d. Paid-up insurance option
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e. Extended-term option
66. A nonforfeiture option guarantees that a policyholder will not lose the policy’s:
a. face value.
b. death benefits for survivors.
c. cash value.
d. premium refunds.
e. premium reductions.
67. _____ is the choice to accept and bear the risk of loss.
a. Loss assumption
b. Risk assumption
c. Risk avoidance
d. Loss avoidance
e. Risk sharing
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68. _____ is any activity that keeps loss from occurring.
a. Loss control
b. Risk transfer
c. Loss prevention
d. Risk sharing
e. Loss acceptance
69. _____ is any activity that lessens the severity of loss once it occurs.
a. Loss control
b. Loss prevention
c. Risk control
d. Risk avoidance
e. Risk sharing
70. The policy owner assumes the investment risk with a _____ insurance policy.
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a. whole life
b. term life
c. variable life
d. viatical life
e. group life
71. Group life insurance is most likely to be for:
a. variable life.
b. a special purpose.
c. whole life.
d. a term.
e. a family.
72. You can learn about the financial strength of an insurance company by checking _____ rating system.
a. the insurance agent’s
b. the U.S. Securities and Exchange Commission’s
c. Standard & Poor’s
d. the Federal Bureau of Investigation’s
e. a financial institution’s
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73. A life insurance agent who takes his or her profession seriously is likely to have earned a professional certification like
the:
a. Chartered Financial Analyst.
b. Chartered Life Underwriter.
c. Chartered Financial Advisor.
d. Certified Insurance Agent.
e. Certified Asset Professional.
74. Alice is 40 years old and earns $35,000 annually. The multiple-of-earnings method used to determine the amount of
life insurance coverage needed for an individual shows that she should have 6.5 times her earnings. How much insurance
should Alice have? (Show all work.)
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