LOMA 280 CH 1-7 EXAM QUESTIONS
WITH COMPLETE SOLUTIONS
GRADED A+
Composite Mortality Rate - Answer-Does not separate smokers from non-smokers
Investment Earnings - Answer-Money insurer invests in funds received from customers
Simple Interest - Answer-Flat amount put on the original principal amount only.
Compound Interest - Answer-Interest on the principal and accrued interest.
Rate of Return - Answer-Selling stock for more than paid; or company may collect
dividends
Lapse Rate - Answer-Percentage of a group of policies that are terminated by the end
of a period for no gain.
Conservative Value - Answer-[1] Mortality rates higher than expected [2] Investment
earnings lower than exp. [3] Op. Exp. Higher
Conservative Values - Answer-Provide risk margin against adverse developments
Premium Rate - Answer-A charge per unit of insurance coverage
Coverage Unit - Answer-Usually equals $1,000 of coverage
Estate - Answer-Accumulated assets an individual owns at time of death.
Will - Answer-Legal document directing how property is to be distributed.
key person life insurance - Answer-individual life insurance a business purchases on the
life of a key person.
buy-sell agreement - Answer-one party agrees to purchase financial interest that a 2nd
party has in a business following the 2nd party's death; and, the 2nd party agrees to
direct his estate to sell his interest in the business to the purchasing party.
Mortgage Life Insurance - Answer-provides benefit amount that corresponds to
decreasing amount owned on a mortgage loan.
, credit life insurance - Answer-term life designed to pay outstanding balance on loans at
death
Family Income coverage - Answer-Provides a stated monthly income benefit amount.
policy rider/endorsement - Answer-amendment to life policy that becomes part of the
contract, either expanding or limiting the benefits payable under the contract
family income policy - Answer-Cash value policy with a family income coverage rider
increasing term insurance policy - Answer-often purchased as rider, for limited time to
meet a need.
renewable term insurance policy - Answer-gives owner option to continue coverage at
the end of the specified term w/o evidence of insurability (proof insured continues to be
insurable risk).
renewal provision - Answer-Gives insured right to continue coverage w/o evidence of
insurability
**Allows policy to be the same or smaller amount/period; cannot be larger face
amount/period**
attained age - Answer-Age on the renewal date, causing premium rate to increase
typically
Yearly Renewable Term (YRT) - Answer-renewable for stated number of years (Annual
Term -ART)
Convertible term - Answer-allows owner to change/convert term to cash value policy
w/o providing evidence that the insured is an insurable risk. Located in conversion
privilege
Attained age conversion - Answer-premium rate for cash value policy is based on the
insured's age at the time the policy is converted.
original age conversion - Answer-premium rate for cash policy based on insured's age
at original issue.
return of premium (ROP) term - Answer-promises return of premium if insured does not
die during term.
Whole life - Answer-Coverage at level premium rate that does not change as insured
ages.
Continuous Premium - Answer-(ordinary life) premiums are payable until the death of
insured.
WITH COMPLETE SOLUTIONS
GRADED A+
Composite Mortality Rate - Answer-Does not separate smokers from non-smokers
Investment Earnings - Answer-Money insurer invests in funds received from customers
Simple Interest - Answer-Flat amount put on the original principal amount only.
Compound Interest - Answer-Interest on the principal and accrued interest.
Rate of Return - Answer-Selling stock for more than paid; or company may collect
dividends
Lapse Rate - Answer-Percentage of a group of policies that are terminated by the end
of a period for no gain.
Conservative Value - Answer-[1] Mortality rates higher than expected [2] Investment
earnings lower than exp. [3] Op. Exp. Higher
Conservative Values - Answer-Provide risk margin against adverse developments
Premium Rate - Answer-A charge per unit of insurance coverage
Coverage Unit - Answer-Usually equals $1,000 of coverage
Estate - Answer-Accumulated assets an individual owns at time of death.
Will - Answer-Legal document directing how property is to be distributed.
key person life insurance - Answer-individual life insurance a business purchases on the
life of a key person.
buy-sell agreement - Answer-one party agrees to purchase financial interest that a 2nd
party has in a business following the 2nd party's death; and, the 2nd party agrees to
direct his estate to sell his interest in the business to the purchasing party.
Mortgage Life Insurance - Answer-provides benefit amount that corresponds to
decreasing amount owned on a mortgage loan.
, credit life insurance - Answer-term life designed to pay outstanding balance on loans at
death
Family Income coverage - Answer-Provides a stated monthly income benefit amount.
policy rider/endorsement - Answer-amendment to life policy that becomes part of the
contract, either expanding or limiting the benefits payable under the contract
family income policy - Answer-Cash value policy with a family income coverage rider
increasing term insurance policy - Answer-often purchased as rider, for limited time to
meet a need.
renewable term insurance policy - Answer-gives owner option to continue coverage at
the end of the specified term w/o evidence of insurability (proof insured continues to be
insurable risk).
renewal provision - Answer-Gives insured right to continue coverage w/o evidence of
insurability
**Allows policy to be the same or smaller amount/period; cannot be larger face
amount/period**
attained age - Answer-Age on the renewal date, causing premium rate to increase
typically
Yearly Renewable Term (YRT) - Answer-renewable for stated number of years (Annual
Term -ART)
Convertible term - Answer-allows owner to change/convert term to cash value policy
w/o providing evidence that the insured is an insurable risk. Located in conversion
privilege
Attained age conversion - Answer-premium rate for cash value policy is based on the
insured's age at the time the policy is converted.
original age conversion - Answer-premium rate for cash policy based on insured's age
at original issue.
return of premium (ROP) term - Answer-promises return of premium if insured does not
die during term.
Whole life - Answer-Coverage at level premium rate that does not change as insured
ages.
Continuous Premium - Answer-(ordinary life) premiums are payable until the death of
insured.
