Life Insurance Licensing Exam Prep
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1. Which of the following statements generally guides a.) Total loading from all
insurance companies in determining "loading"? policies should cover total
a.) Total loading from all policies should cover total op- operating costs, provide a
erating costs, provide a safety margin, and contribute safety margin, and con-
to profits or surplus. tribute to profits or sur-
b.) The resulting net premiums should help the com- plus.
pany maintain or improve its competitive position.
c.) Total loading from all policies should meet industry
averages.
d.) Expenses should be divided primarily among the
company's most profitable plans and lowest mortality
experience.
2. Which of the following most accurately describes the c.) The net single pre-
basic function of a life insurance policy's net premi- mium is the amount re-
um? quired to cover the policy's
a.) The net premium represents the insurer's mortality promised benefits, with-
charge. out accounting for the in-
b.) The net premium is the amount an individual ac- surer's policy-related ex-
tually pays to provide all the benefits promised in the penses.
policy regardless of premium mode.
c.) The net single premium is the amount required to
cover the policy's promised benefits, without account-
ing for the insurer's policy-related expenses.
d.) The net premium is the amount actually charged to
the policyowner.
3. Stephanie is a policyowner who pays premiums b.) The insurer charges
monthly. How does her insurer cover the cost of send- higher premiums.
ing her more frequent premium notices?
a.) The insurer views the lost earnings as a cost of
doing business.
, Life Insurance Licensing Exam Prep
Study online at https://quizlet.com/_btvcmb
b.) The insurer charges higher premiums.
c.) The insurer imposes policy loan restrictions.
d.) The insurer charges a one-time lost-earnings fee.
4. How do actuaries compensate for the cost of running b.) They add an expense
the business when determining the gross premium load, which includes a
charged to the policyowner? safety margin factor, to the
a.) They assume a higher rate of interest than actually net premium to produce
expected, which provides a safety margin by increas- the gross premium.
ing the gross premium.
b.) They add an expense load, which includes a safety
margin factor, to the net premium to produce the gross
premium.
c.) They increase the mortality charge, increasing the
net premium.
d.) They assume there will be fewer deaths than their
past mortality experience would predict, which pro-
vides a safety margin by increasing the gross premi-
um.
5. What do actuaries use to predict the likelihood of an b.) mortality
individual dying at any certain age in the premium
rate-making process?
a.) morbidity
b.) mortality
c.) industry-wide rating history
d.) company experience
6. Loading reflects the costs that the insurance company a.) mortality costs
can expect to pay for its operations. These costs in-
clude all of the following, EXCEPT:
a.) mortality costs
, Life Insurance Licensing Exam Prep
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b.) employee benefits
c.) the insurance company's employee salaries
d.) commissions paid to the insurer's agents
7. Which of the following do variable life insurance pre- d.) maintenance fee
miums generally include to cover the cost of managing
the investment element of the contract?
a.) premium surcharge
b.) quarterly administrative fee
c.) compensation fee
d.) maintenance fee
8. Actuaries base traditional life insurance premiums on d.) sales projections
all of the following factors, EXCEPT:
a.) expenses
b.) mortality
c.) interest rates
d.) sales projections
9. Which of the following best describes the premium d.) It is a state tax imposed
tax insurance companies must pay when they receive by relatively few states.
premiums?
a.) It is federal tax paid to the U.S. Treasury.
b.) It is a state tax imposed by all states.
c.) It is a federal tax that is collected at the state level
by all states.
d.) It is a state tax imposed by relatively few states.
10. Which one of the following best describes a "level pre- d.) The policyowner pays
mium" payment plan? the same amount each
a.) Level premiums are always used in life insurance. time the premium is due
b.) The policyowner does not have the choice of paying for the full duration of the
the premium on a level basis or a flexible basis. premium-paying period.
, Life Insurance Licensing Exam Prep
Study online at https://quizlet.com/_btvcmb
c.) The premium may increase or decrease over the
policy's term, depending on the performance of the
policy.
d.) The policyowner pays the same amount each time
the premium is due for the full duration of the premi-
um-paying period.
11. Carl is a policyowner who prefers to pay premiums c.) The insurer divides the
monthly rather than annually. How will Carl's insur- annual premium by 12
ance company adjust his premium to accommodate and then adds a modest
this request? charge.
a.) The insurer divides the annual premium by 12 and
then adds a modest charge in the first policy year after
which premiums equal the annual premium divided by
12.
b.) The insurer divides the annual premium by 12 and
then reduces the premium amount to reflect the fact
that premiums will be paid throughout the year.
c.) The insurer divides the annual premium by 12 and
then adds a modest charge.
d.) The insurer simply divides the annual premium by
12.
12. In the actuary's calculation of life insurance premium c.) Premiums will be lower
rates, what affect will a higher interest rate assump-
tion have on the premium rate?
a.) Premiums will be higher.
b.) It will have no effect.
c.) Premiums will be lower
d.) The effect cannot be known.
13.
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1. Which of the following statements generally guides a.) Total loading from all
insurance companies in determining "loading"? policies should cover total
a.) Total loading from all policies should cover total op- operating costs, provide a
erating costs, provide a safety margin, and contribute safety margin, and con-
to profits or surplus. tribute to profits or sur-
b.) The resulting net premiums should help the com- plus.
pany maintain or improve its competitive position.
c.) Total loading from all policies should meet industry
averages.
d.) Expenses should be divided primarily among the
company's most profitable plans and lowest mortality
experience.
2. Which of the following most accurately describes the c.) The net single pre-
basic function of a life insurance policy's net premi- mium is the amount re-
um? quired to cover the policy's
a.) The net premium represents the insurer's mortality promised benefits, with-
charge. out accounting for the in-
b.) The net premium is the amount an individual ac- surer's policy-related ex-
tually pays to provide all the benefits promised in the penses.
policy regardless of premium mode.
c.) The net single premium is the amount required to
cover the policy's promised benefits, without account-
ing for the insurer's policy-related expenses.
d.) The net premium is the amount actually charged to
the policyowner.
3. Stephanie is a policyowner who pays premiums b.) The insurer charges
monthly. How does her insurer cover the cost of send- higher premiums.
ing her more frequent premium notices?
a.) The insurer views the lost earnings as a cost of
doing business.
, Life Insurance Licensing Exam Prep
Study online at https://quizlet.com/_btvcmb
b.) The insurer charges higher premiums.
c.) The insurer imposes policy loan restrictions.
d.) The insurer charges a one-time lost-earnings fee.
4. How do actuaries compensate for the cost of running b.) They add an expense
the business when determining the gross premium load, which includes a
charged to the policyowner? safety margin factor, to the
a.) They assume a higher rate of interest than actually net premium to produce
expected, which provides a safety margin by increas- the gross premium.
ing the gross premium.
b.) They add an expense load, which includes a safety
margin factor, to the net premium to produce the gross
premium.
c.) They increase the mortality charge, increasing the
net premium.
d.) They assume there will be fewer deaths than their
past mortality experience would predict, which pro-
vides a safety margin by increasing the gross premi-
um.
5. What do actuaries use to predict the likelihood of an b.) mortality
individual dying at any certain age in the premium
rate-making process?
a.) morbidity
b.) mortality
c.) industry-wide rating history
d.) company experience
6. Loading reflects the costs that the insurance company a.) mortality costs
can expect to pay for its operations. These costs in-
clude all of the following, EXCEPT:
a.) mortality costs
, Life Insurance Licensing Exam Prep
Study online at https://quizlet.com/_btvcmb
b.) employee benefits
c.) the insurance company's employee salaries
d.) commissions paid to the insurer's agents
7. Which of the following do variable life insurance pre- d.) maintenance fee
miums generally include to cover the cost of managing
the investment element of the contract?
a.) premium surcharge
b.) quarterly administrative fee
c.) compensation fee
d.) maintenance fee
8. Actuaries base traditional life insurance premiums on d.) sales projections
all of the following factors, EXCEPT:
a.) expenses
b.) mortality
c.) interest rates
d.) sales projections
9. Which of the following best describes the premium d.) It is a state tax imposed
tax insurance companies must pay when they receive by relatively few states.
premiums?
a.) It is federal tax paid to the U.S. Treasury.
b.) It is a state tax imposed by all states.
c.) It is a federal tax that is collected at the state level
by all states.
d.) It is a state tax imposed by relatively few states.
10. Which one of the following best describes a "level pre- d.) The policyowner pays
mium" payment plan? the same amount each
a.) Level premiums are always used in life insurance. time the premium is due
b.) The policyowner does not have the choice of paying for the full duration of the
the premium on a level basis or a flexible basis. premium-paying period.
, Life Insurance Licensing Exam Prep
Study online at https://quizlet.com/_btvcmb
c.) The premium may increase or decrease over the
policy's term, depending on the performance of the
policy.
d.) The policyowner pays the same amount each time
the premium is due for the full duration of the premi-
um-paying period.
11. Carl is a policyowner who prefers to pay premiums c.) The insurer divides the
monthly rather than annually. How will Carl's insur- annual premium by 12
ance company adjust his premium to accommodate and then adds a modest
this request? charge.
a.) The insurer divides the annual premium by 12 and
then adds a modest charge in the first policy year after
which premiums equal the annual premium divided by
12.
b.) The insurer divides the annual premium by 12 and
then reduces the premium amount to reflect the fact
that premiums will be paid throughout the year.
c.) The insurer divides the annual premium by 12 and
then adds a modest charge.
d.) The insurer simply divides the annual premium by
12.
12. In the actuary's calculation of life insurance premium c.) Premiums will be lower
rates, what affect will a higher interest rate assump-
tion have on the premium rate?
a.) Premiums will be higher.
b.) It will have no effect.
c.) Premiums will be lower
d.) The effect cannot be known.
13.
