LLQP LIFE ACTUAL TEST PAPER
QUESTIONS AND SOLUTIONS COMPLETE
STUDY GUIDE
●● Define "Insurance"
LLQP - LIFE VL 01
Answer: Insurance can be summed up by two words "Spreading Risk."
Insurance takes the risks associated with many individuals combine
them and spread the combined risks over the group.
Insurance spreads the risk amongst people in the same risk class. For
example, the risk of 40 year-old man dying this year is lower than the 70
year-old woman dying this year and therefore they would not be in the
same risk class.
Life Insurance can be summarized as follows:
"If the life insurred dies from a covered cause while the policy is in
force, a tax-free benefit is payable to the beneficiary of the policy. "
●● What are the factors considered when approving life insurance?
LLQP - LIFE VL 01
,Answer: - Age
- Gender
- Personal and family health history
- Smoking status
- Employment
- Etc.
●● What are the two ways of qualifying the risk of death?
LLQP - LIFE VL 01
Answer: 1. Life Expectancy
"Another 20 years"
2. The Probability of Death in a Given Year
"1 in 1,000"
●● Define "beneficiary"
LLQP - LIFE VL 01
Answer: the person (or other entity ) who the policy holder (the insured)
selected to receive the eventual death benefit.
,●● Give one scenario which explains
"If the life insurred dies from a covered cause while the policy is in
force, a tax-free benefit is payable to the beneficiary of the policy. "
LLQP - LIFE VL 01
Answer: The couple are just married with a baby. The husband earns
$120,000 per year. The wife stays home to take care of the baby full-
time. They worry what will happen if the husband dies unexpectedly and
his income stops.
LIFE INSURANCE IS THE ANSWER.
They purchased a life insurance policy so that upon the husband's death,
the life insurance company would pay a tax-free death benefit of
$2,000,000. This lump-sum of money could be invested to replace the
husband's income.
●● Give non-life insurance examples of four ways to deal with risks.
LLQP - LIFE VL 01
Answer: You used your entire life savings to purchase a new sports car.
You bought the car because you love speed but you are concerned about
the financial impact that may arise if you had a major accident.
You have 4 options to manage the risk":
, 1. Risk Avoidance: you could choose not to
drive the the car and park it in your garage just for show.
2. Risk Reduction: you reduce the risk by always respecting the posted
speed limits and road signs.
3. Risk Retention: you could retain the risk or self-insure. If your car got
crashed, you will no longer have the car, and can take the bus.
4. Risk Transfer: you could transfer the risk to an insurance company by
purchasing automobile insurance. ("Risk-Sharing")
●● What are the two categories of life insurance?
LLQP - LIFE VL 02
Answer: 1. Temporary insurance - also known as term insurance.
2. Permanent insurance - which includes:
i. term
ii. Term-100 (T-100)
iii. Whole Life (WL)
iv. Universal Life (UL)
QUESTIONS AND SOLUTIONS COMPLETE
STUDY GUIDE
●● Define "Insurance"
LLQP - LIFE VL 01
Answer: Insurance can be summed up by two words "Spreading Risk."
Insurance takes the risks associated with many individuals combine
them and spread the combined risks over the group.
Insurance spreads the risk amongst people in the same risk class. For
example, the risk of 40 year-old man dying this year is lower than the 70
year-old woman dying this year and therefore they would not be in the
same risk class.
Life Insurance can be summarized as follows:
"If the life insurred dies from a covered cause while the policy is in
force, a tax-free benefit is payable to the beneficiary of the policy. "
●● What are the factors considered when approving life insurance?
LLQP - LIFE VL 01
,Answer: - Age
- Gender
- Personal and family health history
- Smoking status
- Employment
- Etc.
●● What are the two ways of qualifying the risk of death?
LLQP - LIFE VL 01
Answer: 1. Life Expectancy
"Another 20 years"
2. The Probability of Death in a Given Year
"1 in 1,000"
●● Define "beneficiary"
LLQP - LIFE VL 01
Answer: the person (or other entity ) who the policy holder (the insured)
selected to receive the eventual death benefit.
,●● Give one scenario which explains
"If the life insurred dies from a covered cause while the policy is in
force, a tax-free benefit is payable to the beneficiary of the policy. "
LLQP - LIFE VL 01
Answer: The couple are just married with a baby. The husband earns
$120,000 per year. The wife stays home to take care of the baby full-
time. They worry what will happen if the husband dies unexpectedly and
his income stops.
LIFE INSURANCE IS THE ANSWER.
They purchased a life insurance policy so that upon the husband's death,
the life insurance company would pay a tax-free death benefit of
$2,000,000. This lump-sum of money could be invested to replace the
husband's income.
●● Give non-life insurance examples of four ways to deal with risks.
LLQP - LIFE VL 01
Answer: You used your entire life savings to purchase a new sports car.
You bought the car because you love speed but you are concerned about
the financial impact that may arise if you had a major accident.
You have 4 options to manage the risk":
, 1. Risk Avoidance: you could choose not to
drive the the car and park it in your garage just for show.
2. Risk Reduction: you reduce the risk by always respecting the posted
speed limits and road signs.
3. Risk Retention: you could retain the risk or self-insure. If your car got
crashed, you will no longer have the car, and can take the bus.
4. Risk Transfer: you could transfer the risk to an insurance company by
purchasing automobile insurance. ("Risk-Sharing")
●● What are the two categories of life insurance?
LLQP - LIFE VL 02
Answer: 1. Temporary insurance - also known as term insurance.
2. Permanent insurance - which includes:
i. term
ii. Term-100 (T-100)
iii. Whole Life (WL)
iv. Universal Life (UL)
