LOMA 281 PASSED Exam Questions and
CORRECT Answers
What are speculative risks? - CORRECT ANSWER-Risks that involve three outcomes: loss,
gain, or no change
What are pure risks? - CORRECT ANSWER-Risks that involve no possibility of gain
What risks are insurable? - CORRECT ANSWER-Only pure risks
Speculative risks involve the possibility of gain so they cannot be insured
What is a retention limit? - CORRECT ANSWER-The maximum amount of risk the insurer is
willing to carry at its own risk
What is a commutative contract? - CORRECT ANSWER-The parties agree to exchange
specified items or services that are equal in value
What is an aleatory contract? - CORRECT ANSWER-One party exchanges something of value
for the other party's conditional promise
Is a life insurance policy a commutative or aleatory contract? - CORRECT ANSWER-Aleatory
Are life insurance contracts bargaining contracts? - CORRECT ANSWER-No, they are contracts
of adhesion. The insurance company sets the terms and the applicant can either accept or reject
Are insurance contracts formal or informal? - CORRECT ANSWER-Informal
What are the requirements of a valid contract? - CORRECT ANSWER-Mutual assent
Legally adequate consideration
, Lawful purpose
Contractual capacity
Which relatives automatically satisfy the requirement of insurable interest? - CORRECT
ANSWER-Spouses, children, parents, siblings, grandparents, and grandchildren
What is ROP insurance? - CORRECT ANSWER-A form of term life insurance that provides a
death benefit if the insured dies during the term of coverage and promises a return of premiums
if the insured does not die during the term of coverage.
What are the two main elements of cash value life insurance that term life does not have? -
CORRECT ANSWER-Lifetime coverage
A savings element
Can a cash value policy with outstanding loans be surrendered? - CORRECT ANSWER-Yes, the
surrender value will just be reduced by the amount of any outstanding policy loans
What is a modified-premium whole life insurance policy? - CORRECT ANSWER-A whole life
insurance policy for which the annual premium amount increases after a specified initial period
What is universal life insurance? - CORRECT ANSWER-A form of cash value life insurance
that is characterized by its flexible premiums, its flexible face amount and death benefit amount,
and its separation of the three primary policy elements.
What is variable universal life insurance? - CORRECT ANSWER-Cash value life insurance that
combines the premium and death benefit flexibility of universal life insurance with the
investment flexibility and risk of variable life insurance. Also called flexible-premium variable
life insurance.
Are annuities life insurance products according to U.S. regulations? - CORRECT ANSWER-Yes
What does SPIA stand for? - CORRECT ANSWER-Single Premium Immediate Annuity
CORRECT Answers
What are speculative risks? - CORRECT ANSWER-Risks that involve three outcomes: loss,
gain, or no change
What are pure risks? - CORRECT ANSWER-Risks that involve no possibility of gain
What risks are insurable? - CORRECT ANSWER-Only pure risks
Speculative risks involve the possibility of gain so they cannot be insured
What is a retention limit? - CORRECT ANSWER-The maximum amount of risk the insurer is
willing to carry at its own risk
What is a commutative contract? - CORRECT ANSWER-The parties agree to exchange
specified items or services that are equal in value
What is an aleatory contract? - CORRECT ANSWER-One party exchanges something of value
for the other party's conditional promise
Is a life insurance policy a commutative or aleatory contract? - CORRECT ANSWER-Aleatory
Are life insurance contracts bargaining contracts? - CORRECT ANSWER-No, they are contracts
of adhesion. The insurance company sets the terms and the applicant can either accept or reject
Are insurance contracts formal or informal? - CORRECT ANSWER-Informal
What are the requirements of a valid contract? - CORRECT ANSWER-Mutual assent
Legally adequate consideration
, Lawful purpose
Contractual capacity
Which relatives automatically satisfy the requirement of insurable interest? - CORRECT
ANSWER-Spouses, children, parents, siblings, grandparents, and grandchildren
What is ROP insurance? - CORRECT ANSWER-A form of term life insurance that provides a
death benefit if the insured dies during the term of coverage and promises a return of premiums
if the insured does not die during the term of coverage.
What are the two main elements of cash value life insurance that term life does not have? -
CORRECT ANSWER-Lifetime coverage
A savings element
Can a cash value policy with outstanding loans be surrendered? - CORRECT ANSWER-Yes, the
surrender value will just be reduced by the amount of any outstanding policy loans
What is a modified-premium whole life insurance policy? - CORRECT ANSWER-A whole life
insurance policy for which the annual premium amount increases after a specified initial period
What is universal life insurance? - CORRECT ANSWER-A form of cash value life insurance
that is characterized by its flexible premiums, its flexible face amount and death benefit amount,
and its separation of the three primary policy elements.
What is variable universal life insurance? - CORRECT ANSWER-Cash value life insurance that
combines the premium and death benefit flexibility of universal life insurance with the
investment flexibility and risk of variable life insurance. Also called flexible-premium variable
life insurance.
Are annuities life insurance products according to U.S. regulations? - CORRECT ANSWER-Yes
What does SPIA stand for? - CORRECT ANSWER-Single Premium Immediate Annuity
