LOMA 281 Meeting Customer Needs With Insurance and Annuities250
Original Practice Questions • Modules 1–4 • Answers and
Explanations Latest Update This Year
Study resource: These are original practice questions for review. Confirm
terminology and module coverage against the edition of your course materials.
Insurance products, taxation, and regulations vary by jurisdiction.
Module 1 — Insurance and Financial Needs
1. The primary purpose of insurance is to:
A. Replace the need for savings
B. Guarantee investment profits
C. Transfer specified financial risks in exchange for a premium
D. Eliminate every possible financial loss
Correct answer: C. Transfer specified financial risks in exchange for a
premium
Explanation: Insurance transfers defined risks to an insurer under a contract; it
does not eliminate every risk or guarantee profits.
2. Which situation best illustrates an insurable risk?
A. A planned purchase with a known price
B. An uncertain event that could cause financial loss
C. A purely speculative bet on a stock price
D. A loss that is intentional and certain
Correct answer: B. An uncertain event that could cause financial loss
LOMA 281 Questions | Page 1
,Explanation: Insurance generally addresses uncertain events that can create
measurable financial loss.
3. A customer's financial needs analysis should primarily identify:
A. Only the customer's age
B. The agent's preferred sales target
C. The most expensive product available
D. Goals, resources, obligations, and protection gaps
Correct answer: D. Goals, resources, obligations, and protection gaps
Explanation: A needs analysis considers the customer's goals, assets, liabilities,
income, and existing coverage.
4. Which is an example of risk avoidance?
A. Choosing not to participate in a dangerous activity
B. Setting aside an emergency fund
C. Installing smoke alarms
D. Buying homeowners insurance
Correct answer: A. Choosing not to participate in a dangerous activity
Explanation: Avoidance means eliminating exposure by not undertaking the
activity.
5. Which strategy is an example of risk reduction?
A. Transferring risk with insurance
B. Buying a lottery ticket
C. Accepting all loss without preparation
D. Wearing a seat belt
Correct answer: D. Wearing a seat belt
Explanation: Seat belts reduce the likelihood or severity of injury.
6. Risk retention means that a person:
A. Avoids every risky activity
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, B. Receives a guaranteed benefit from the government
C. Transfers all losses to an insurer
D. Accepts responsibility for some or all of a potential loss
Correct answer: D. Accepts responsibility for some or all of a potential
loss
Explanation: Retention is the decision to bear a risk, sometimes through
deductibles or self-insurance.
7. A household's human life value is most closely related to:
A. The person's credit score alone
B. The economic contribution the person is expected to make
C. The resale value of the person's belongings
D. The face amount of every policy owned
Correct answer: B. The economic contribution the person is expected to
make
Explanation: Human life value estimates the present economic value of future
contributions.
8. Which is a personal financial goal?
A. Funding a child's education
B. Increasing the insurer's market share
C. Reducing a competitor's expenses
D. Improving an agent's commission rate
Correct answer: A. Funding a child's education
Explanation: Education funding is a customer-centered financial objective.
9. A customer has high debt, dependents, and little savings. Which need
should generally be assessed first?
A. Protection against premature death and income loss
B. Speculative investing
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, C. A large charitable bequest
D. Luxury retirement travel
Correct answer: A. Protection against premature death and income loss
Explanation: Dependents and debt create immediate protection needs that
should be evaluated before discretionary goals.
10. Why should an adviser review existing insurance before
recommending new coverage?
A. Existing policies are always unsuitable
B. It helps identify coverage gaps, duplication, costs, and policy features
C. It removes the need for customer consent
D. It guarantees underwriting approval
Correct answer: B. It helps identify coverage gaps, duplication, costs, and
policy features
Explanation: Reviewing existing coverage supports a complete, suitable
recommendation.
Module 2 — Life Insurance Fundamentals
11. In a life insurance contract, the policyowner is the person who
generally:
A. Sets the insurer's claims rules
B. Automatically receives the death benefit
C. Exercises contractual ownership rights
D. Must always be the insured
Correct answer: C. Exercises contractual ownership rights
Explanation: The owner controls rights such as beneficiary changes, subject to
policy terms.
12. The insured in a life insurance policy is the person whose:
LOMA 281 Questions | Page 4
Original Practice Questions • Modules 1–4 • Answers and
Explanations Latest Update This Year
Study resource: These are original practice questions for review. Confirm
terminology and module coverage against the edition of your course materials.
Insurance products, taxation, and regulations vary by jurisdiction.
Module 1 — Insurance and Financial Needs
1. The primary purpose of insurance is to:
A. Replace the need for savings
B. Guarantee investment profits
C. Transfer specified financial risks in exchange for a premium
D. Eliminate every possible financial loss
Correct answer: C. Transfer specified financial risks in exchange for a
premium
Explanation: Insurance transfers defined risks to an insurer under a contract; it
does not eliminate every risk or guarantee profits.
2. Which situation best illustrates an insurable risk?
A. A planned purchase with a known price
B. An uncertain event that could cause financial loss
C. A purely speculative bet on a stock price
D. A loss that is intentional and certain
Correct answer: B. An uncertain event that could cause financial loss
LOMA 281 Questions | Page 1
,Explanation: Insurance generally addresses uncertain events that can create
measurable financial loss.
3. A customer's financial needs analysis should primarily identify:
A. Only the customer's age
B. The agent's preferred sales target
C. The most expensive product available
D. Goals, resources, obligations, and protection gaps
Correct answer: D. Goals, resources, obligations, and protection gaps
Explanation: A needs analysis considers the customer's goals, assets, liabilities,
income, and existing coverage.
4. Which is an example of risk avoidance?
A. Choosing not to participate in a dangerous activity
B. Setting aside an emergency fund
C. Installing smoke alarms
D. Buying homeowners insurance
Correct answer: A. Choosing not to participate in a dangerous activity
Explanation: Avoidance means eliminating exposure by not undertaking the
activity.
5. Which strategy is an example of risk reduction?
A. Transferring risk with insurance
B. Buying a lottery ticket
C. Accepting all loss without preparation
D. Wearing a seat belt
Correct answer: D. Wearing a seat belt
Explanation: Seat belts reduce the likelihood or severity of injury.
6. Risk retention means that a person:
A. Avoids every risky activity
LOMA 281 Questions | Page 2
, B. Receives a guaranteed benefit from the government
C. Transfers all losses to an insurer
D. Accepts responsibility for some or all of a potential loss
Correct answer: D. Accepts responsibility for some or all of a potential
loss
Explanation: Retention is the decision to bear a risk, sometimes through
deductibles or self-insurance.
7. A household's human life value is most closely related to:
A. The person's credit score alone
B. The economic contribution the person is expected to make
C. The resale value of the person's belongings
D. The face amount of every policy owned
Correct answer: B. The economic contribution the person is expected to
make
Explanation: Human life value estimates the present economic value of future
contributions.
8. Which is a personal financial goal?
A. Funding a child's education
B. Increasing the insurer's market share
C. Reducing a competitor's expenses
D. Improving an agent's commission rate
Correct answer: A. Funding a child's education
Explanation: Education funding is a customer-centered financial objective.
9. A customer has high debt, dependents, and little savings. Which need
should generally be assessed first?
A. Protection against premature death and income loss
B. Speculative investing
LOMA 281 Questions | Page 3
, C. A large charitable bequest
D. Luxury retirement travel
Correct answer: A. Protection against premature death and income loss
Explanation: Dependents and debt create immediate protection needs that
should be evaluated before discretionary goals.
10. Why should an adviser review existing insurance before
recommending new coverage?
A. Existing policies are always unsuitable
B. It helps identify coverage gaps, duplication, costs, and policy features
C. It removes the need for customer consent
D. It guarantees underwriting approval
Correct answer: B. It helps identify coverage gaps, duplication, costs, and
policy features
Explanation: Reviewing existing coverage supports a complete, suitable
recommendation.
Module 2 — Life Insurance Fundamentals
11. In a life insurance contract, the policyowner is the person who
generally:
A. Sets the insurer's claims rules
B. Automatically receives the death benefit
C. Exercises contractual ownership rights
D. Must always be the insured
Correct answer: C. Exercises contractual ownership rights
Explanation: The owner controls rights such as beneficiary changes, subject to
policy terms.
12. The insured in a life insurance policy is the person whose:
LOMA 281 Questions | Page 4
