AIIM Certified Life Insurance CLIP Exam
**Question 1.** Which principle explains why insurers can predict losses accurately by pooling
many similar risks?
A) Law of large numbers
B) Principle of indemnity
C) Insurable interest
D) Utmost good faith
Answer: A
Explanation: The law of large numbers states that as the number of exposure units increases,
actual loss experience will converge toward expected loss, allowing accurate premium setting.
**Question 2.** In an insurance contract, which element is the promise by the insurer to pay
upon the occurrence of a defined event?
A) Offer
B) Consideration
C) Acceptance
D) Condition precedent
Answer: B
Explanation: Consideration is the value exchanged; in insurance, the insurer’s consideration is
the promise to pay the claim in exchange for the premium paid by the insured.
**Question 3.** A policy that is presented on a “take‑it‑or‑leave‑it” basis is known as a:
A) Unilateral contract
B) Contract of adhesion
C) Aleatory contract
D) Bilateral contract
Answer: B
, AIIM Certified Life Insurance CLIP Exam
Explanation: A contract of adhesion is drafted by one party (the insurer) and the other party
(the insured) has little ability to negotiate terms.
**Question 4.** Which of the following best defines “insurable interest”?
A) The desire to profit from a loss
B) A legal right to a benefit from the insured’s life
C) The amount of premium the insurer can charge
D) The insurer’s financial stake in the policy
Answer: B
Explanation: Insurable interest exists when the policyholder would suffer a genuine loss if the
insured event occurs, such as a spouse’s death.
**Question 5.** The doctrine of “utmost good faith” (uberrimae fidei) requires:
A) Both parties to act honestly and disclose all material facts
B) The insurer to guarantee a profit to the insured
C) The insured to pay premiums in advance only
D) The policy to be a unilateral contract only
Answer: A
Explanation: Under utmost good faith, both insurer and insured must disclose all material
information that could affect the contract.
**Question 6.** Who is primarily responsible for collecting premiums from policyholders?
A) Beneficiary
B) Insured
C) Intermediary (agent or broker)
D) Underwriter
Answer: C
, AIIM Certified Life Insurance CLIP Exam
Explanation: Agents and brokers act as intermediaries, facilitating premium collection and policy
servicing on behalf of the insurer.
**Question 7.** A level term life insurance policy provides:
A) Decreasing death benefit over time
B) A constant death benefit throughout the term
C) A guaranteed cash value after five years
D) A convertible option only at policy issuance
Answer: B
Explanation: Level term maintains the same face amount for the entire term of the policy.
**Question 8.** Which rider allows the insured to increase coverage at specified intervals
without providing evidence of insurability?
A) Accidental death benefit rider
B) Waiver of premium rider
C) Guaranteed insurability rider
D) Return of premium rider
Answer: C
Explanation: A guaranteed insurability rider permits future increase in coverage at set times
without new medical underwriting.
**Question 9.** In a whole life policy, the cash value:
A) Is taxed as ordinary income each year
B) Grows at a variable rate based on market performance
C) Accumulates at a guaranteed minimum interest rate
D) Is only available after the policy is surrendered
Answer: C
, AIIM Certified Life Insurance CLIP Exam
Explanation: Whole life policies guarantee a minimum interest rate on cash value, providing
steady growth.
**Question 10.** Which type of universal life policy ties crediting rates to a stock market index
while protecting the cash value from loss?
A) Variable universal life (VUL)
B) Indexed universal life (IUL)
C) Traditional universal life (UL)
D) Guaranteed universal life (GUL)
Answer: B
Explanation: IUL policies credit interest based on an external index performance, with a floor to
prevent negative returns.
**Question 11.** A “second‑to‑die” survivorship policy insures:
A) Two unrelated individuals with separate benefits
B) Two spouses, paying a benefit after the first death
C) Two spouses, paying a benefit after the second death
D) Two children, paying a benefit at each child’s death
Answer: C
Explanation: Survivorship (second‑to‑die) policies provide a death benefit only after both
insureds have passed, often used for estate planning.
**Question 12.** Which annuity type provides guaranteed income that begins immediately
after a single premium payment?
A) Deferred fixed annuity
B) Immediate variable annuity
C) Immediate fixed annuity
**Question 1.** Which principle explains why insurers can predict losses accurately by pooling
many similar risks?
A) Law of large numbers
B) Principle of indemnity
C) Insurable interest
D) Utmost good faith
Answer: A
Explanation: The law of large numbers states that as the number of exposure units increases,
actual loss experience will converge toward expected loss, allowing accurate premium setting.
**Question 2.** In an insurance contract, which element is the promise by the insurer to pay
upon the occurrence of a defined event?
A) Offer
B) Consideration
C) Acceptance
D) Condition precedent
Answer: B
Explanation: Consideration is the value exchanged; in insurance, the insurer’s consideration is
the promise to pay the claim in exchange for the premium paid by the insured.
**Question 3.** A policy that is presented on a “take‑it‑or‑leave‑it” basis is known as a:
A) Unilateral contract
B) Contract of adhesion
C) Aleatory contract
D) Bilateral contract
Answer: B
, AIIM Certified Life Insurance CLIP Exam
Explanation: A contract of adhesion is drafted by one party (the insurer) and the other party
(the insured) has little ability to negotiate terms.
**Question 4.** Which of the following best defines “insurable interest”?
A) The desire to profit from a loss
B) A legal right to a benefit from the insured’s life
C) The amount of premium the insurer can charge
D) The insurer’s financial stake in the policy
Answer: B
Explanation: Insurable interest exists when the policyholder would suffer a genuine loss if the
insured event occurs, such as a spouse’s death.
**Question 5.** The doctrine of “utmost good faith” (uberrimae fidei) requires:
A) Both parties to act honestly and disclose all material facts
B) The insurer to guarantee a profit to the insured
C) The insured to pay premiums in advance only
D) The policy to be a unilateral contract only
Answer: A
Explanation: Under utmost good faith, both insurer and insured must disclose all material
information that could affect the contract.
**Question 6.** Who is primarily responsible for collecting premiums from policyholders?
A) Beneficiary
B) Insured
C) Intermediary (agent or broker)
D) Underwriter
Answer: C
, AIIM Certified Life Insurance CLIP Exam
Explanation: Agents and brokers act as intermediaries, facilitating premium collection and policy
servicing on behalf of the insurer.
**Question 7.** A level term life insurance policy provides:
A) Decreasing death benefit over time
B) A constant death benefit throughout the term
C) A guaranteed cash value after five years
D) A convertible option only at policy issuance
Answer: B
Explanation: Level term maintains the same face amount for the entire term of the policy.
**Question 8.** Which rider allows the insured to increase coverage at specified intervals
without providing evidence of insurability?
A) Accidental death benefit rider
B) Waiver of premium rider
C) Guaranteed insurability rider
D) Return of premium rider
Answer: C
Explanation: A guaranteed insurability rider permits future increase in coverage at set times
without new medical underwriting.
**Question 9.** In a whole life policy, the cash value:
A) Is taxed as ordinary income each year
B) Grows at a variable rate based on market performance
C) Accumulates at a guaranteed minimum interest rate
D) Is only available after the policy is surrendered
Answer: C
, AIIM Certified Life Insurance CLIP Exam
Explanation: Whole life policies guarantee a minimum interest rate on cash value, providing
steady growth.
**Question 10.** Which type of universal life policy ties crediting rates to a stock market index
while protecting the cash value from loss?
A) Variable universal life (VUL)
B) Indexed universal life (IUL)
C) Traditional universal life (UL)
D) Guaranteed universal life (GUL)
Answer: B
Explanation: IUL policies credit interest based on an external index performance, with a floor to
prevent negative returns.
**Question 11.** A “second‑to‑die” survivorship policy insures:
A) Two unrelated individuals with separate benefits
B) Two spouses, paying a benefit after the first death
C) Two spouses, paying a benefit after the second death
D) Two children, paying a benefit at each child’s death
Answer: C
Explanation: Survivorship (second‑to‑die) policies provide a death benefit only after both
insureds have passed, often used for estate planning.
**Question 12.** Which annuity type provides guaranteed income that begins immediately
after a single premium payment?
A) Deferred fixed annuity
B) Immediate variable annuity
C) Immediate fixed annuity
