LOMA 361 EXAMINATION TEST 2025/2026 QUESTIONS
AND SOLUTIONS RANKED A+
✔✔Supplementary contract - ✔✔arises from the election of a settlement option by a life
insurance beneficiary. payments are usually called contractual payments
✔✔suspense account - ✔✔An account that is used to record transactions that cannot
be posted immediately to a specified account
Premium suspense is the liability account used to record transactions that are intended
as premiums, but the insure cannot accept as income until a particular event occurs
Insurers usually use these types of accounts for premium payment amounts that are
renewal premiums, different from the amounts in the insurer records, or lacking critical
information such as a policy number
page 229
These accounts are also used when the insurer has received the initial premium but is
still waiting on an underwriting decision for the policy
The end result here is a debit to cash and a credit to premium income
✔✔Premiums paid in advance - ✔✔Premiums that and ensure has received but that are
due on or after the next policy anniversary date
Premium deposits are usually in this category and those are amounts that and insurers
policy owners leave on deposit with the ensure to pay for several years of premiums at
one time
✔✔Premium deposit fund - ✔✔Placing premium deposits into a liability account so that
when an individual premium becomes due, the insured pays it from this account and
credits the premium income
✔✔deposit-type contracts - ✔✔Under SAP , Deposit type contracts that lack a mortality
risk component.
amounts received as payments are not considered premium income but instead I
reported directly to the appropriate liability account on the insurers statutory balance
sheet known as liability for the posit type contracts.
Contracts that do not subject the company to any risk arising from policyholder mortality
or morbidity.
In other words contracts that provide benefit payments that do not depend upon the
death or continued survival of an individual or group of individuals
,Examples include guaranteed interest contracts, annuity certain, supplemental contracts
without life contingencies and dividend accumulations
amounts received as patents are reported on the statutory balance sheet aka "liability
for deposit type contracts."
these payments are accounted for as policy owner account balances which means that
policy owners have more discretion over deposits and withdrawals .
Under GAAP, accounting for investment contracts is similar to accounting for interest
bearing or other financial instruments for the balance a cruise to benefit of the policy
owner or contract owner. Under this approach, premiums or deposit received for
investment contracts are recorded as a deposit liability rather than as a revenue. Typical
GAAP account title for this liability is funds held under deposit contracts
✔✔Guaranteed interest contracts (GIC) - ✔✔The contract holder places one or more
deposits with the insurer for a stated. In exchange for repayment of those deposits plus
interest at a guaranteed rate. These are often used as funding vehicles for group
retirement plans
page 231
✔✔Investment Contract - ✔✔According to GAAP, long duration contracts that do not
expose the insurer to significant risks arising from policy owner or contract owner
mortality
examples include guaranteed interest contracts and most deferred annuity contracts
during the accumulation phase
premiums or deposits received are recorded as a deposit liability
also known as "funds held under deposit contracts"
✔✔Commission - ✔✔Is considered do or accrued when the insured receives a premium
too late in the accounting. To process the payment to the agent by the financial
reporting date. They are generally do or accrued only on premiums that have been
received.
on the balance sheet they are classified as agent commissions do or accrued or
producer commissions due or accrued.
note :
When the insurer pays an agent do or accrued commissions, the aggregate liability
account is decreased, as is the insurers cash.
✔✔Capital - ✔✔"represents the amount of money invested in a company by its owners,
usually through the purchase of the company's stock.
, mutual insurers and fraternal insurers have no capital accounts because they do not
issue stock.
✔✔Surplus - ✔✔calculated as an insurer's assets minus its liabilities and capital
is the cumulative amount of money that remains in a company over time.
important account under SAP.
Assets = Liabilities + Owners' equity
Assets = Liabilities + Capital and Surplus
✔✔common stock - ✔✔"a stock insurer's issue (sale) of its own common stock, which is
recorded in the owners' equity account"
Stock insurers issue common stock to raise capital.
*an insurer that purchases common stock for investment purposes most likely would
update its accounting records by debiting the Stock account and crediting the Cash
account
A typical accounting entry to record the issue and sale of an insurer's common stock at
par value is a debit to Cash and a credit to Common Stock. Recall that the par value of
a stock is the designated legal value assigned to each outstanding share of stock.
"Proceeds from the sale of an insurer's common stock increase its cash and its owners'
equity. However, issuing (selling) common stock requires a stock insurer to pay
transaction costs that reduce its net proceeds from the sale of the stock. In addition,
some issuers of common stock pay regular cash dividends to owners of their stock.
These companies must plan ahead to have funds available to make these dividend
payments."
the most basic form of ownership, including voting rights on major issues, in a company
a type of stock that usually entitles the owner to (1) vote on the selection of directors
and on other important company matters and (2) receive dividends on the stock, if they
are declared.
life insurers typically invest more heavily in this stock.
Under U.S. statutory accounting, most of this type 0f stock is reported at fair value as of
the financial reporting date and they report most preferred stock in a manner similar to
bonds
under US GAAP, insurers report the fair value per share of each stock they own
AND SOLUTIONS RANKED A+
✔✔Supplementary contract - ✔✔arises from the election of a settlement option by a life
insurance beneficiary. payments are usually called contractual payments
✔✔suspense account - ✔✔An account that is used to record transactions that cannot
be posted immediately to a specified account
Premium suspense is the liability account used to record transactions that are intended
as premiums, but the insure cannot accept as income until a particular event occurs
Insurers usually use these types of accounts for premium payment amounts that are
renewal premiums, different from the amounts in the insurer records, or lacking critical
information such as a policy number
page 229
These accounts are also used when the insurer has received the initial premium but is
still waiting on an underwriting decision for the policy
The end result here is a debit to cash and a credit to premium income
✔✔Premiums paid in advance - ✔✔Premiums that and ensure has received but that are
due on or after the next policy anniversary date
Premium deposits are usually in this category and those are amounts that and insurers
policy owners leave on deposit with the ensure to pay for several years of premiums at
one time
✔✔Premium deposit fund - ✔✔Placing premium deposits into a liability account so that
when an individual premium becomes due, the insured pays it from this account and
credits the premium income
✔✔deposit-type contracts - ✔✔Under SAP , Deposit type contracts that lack a mortality
risk component.
amounts received as payments are not considered premium income but instead I
reported directly to the appropriate liability account on the insurers statutory balance
sheet known as liability for the posit type contracts.
Contracts that do not subject the company to any risk arising from policyholder mortality
or morbidity.
In other words contracts that provide benefit payments that do not depend upon the
death or continued survival of an individual or group of individuals
,Examples include guaranteed interest contracts, annuity certain, supplemental contracts
without life contingencies and dividend accumulations
amounts received as patents are reported on the statutory balance sheet aka "liability
for deposit type contracts."
these payments are accounted for as policy owner account balances which means that
policy owners have more discretion over deposits and withdrawals .
Under GAAP, accounting for investment contracts is similar to accounting for interest
bearing or other financial instruments for the balance a cruise to benefit of the policy
owner or contract owner. Under this approach, premiums or deposit received for
investment contracts are recorded as a deposit liability rather than as a revenue. Typical
GAAP account title for this liability is funds held under deposit contracts
✔✔Guaranteed interest contracts (GIC) - ✔✔The contract holder places one or more
deposits with the insurer for a stated. In exchange for repayment of those deposits plus
interest at a guaranteed rate. These are often used as funding vehicles for group
retirement plans
page 231
✔✔Investment Contract - ✔✔According to GAAP, long duration contracts that do not
expose the insurer to significant risks arising from policy owner or contract owner
mortality
examples include guaranteed interest contracts and most deferred annuity contracts
during the accumulation phase
premiums or deposits received are recorded as a deposit liability
also known as "funds held under deposit contracts"
✔✔Commission - ✔✔Is considered do or accrued when the insured receives a premium
too late in the accounting. To process the payment to the agent by the financial
reporting date. They are generally do or accrued only on premiums that have been
received.
on the balance sheet they are classified as agent commissions do or accrued or
producer commissions due or accrued.
note :
When the insurer pays an agent do or accrued commissions, the aggregate liability
account is decreased, as is the insurers cash.
✔✔Capital - ✔✔"represents the amount of money invested in a company by its owners,
usually through the purchase of the company's stock.
, mutual insurers and fraternal insurers have no capital accounts because they do not
issue stock.
✔✔Surplus - ✔✔calculated as an insurer's assets minus its liabilities and capital
is the cumulative amount of money that remains in a company over time.
important account under SAP.
Assets = Liabilities + Owners' equity
Assets = Liabilities + Capital and Surplus
✔✔common stock - ✔✔"a stock insurer's issue (sale) of its own common stock, which is
recorded in the owners' equity account"
Stock insurers issue common stock to raise capital.
*an insurer that purchases common stock for investment purposes most likely would
update its accounting records by debiting the Stock account and crediting the Cash
account
A typical accounting entry to record the issue and sale of an insurer's common stock at
par value is a debit to Cash and a credit to Common Stock. Recall that the par value of
a stock is the designated legal value assigned to each outstanding share of stock.
"Proceeds from the sale of an insurer's common stock increase its cash and its owners'
equity. However, issuing (selling) common stock requires a stock insurer to pay
transaction costs that reduce its net proceeds from the sale of the stock. In addition,
some issuers of common stock pay regular cash dividends to owners of their stock.
These companies must plan ahead to have funds available to make these dividend
payments."
the most basic form of ownership, including voting rights on major issues, in a company
a type of stock that usually entitles the owner to (1) vote on the selection of directors
and on other important company matters and (2) receive dividends on the stock, if they
are declared.
life insurers typically invest more heavily in this stock.
Under U.S. statutory accounting, most of this type 0f stock is reported at fair value as of
the financial reporting date and they report most preferred stock in a manner similar to
bonds
under US GAAP, insurers report the fair value per share of each stock they own
