1|Page
PRINCIPLES OF RISK MANAGEMENT AND
INSURANCE EXAM UPDATED 2025
COMPLETE EXAM| 200 ACTUAL EXAM
QUESTIONS WITH CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
The human life value is defined as the - ANSWER - present value of the
family's share of a deceased breadwinner's future earnings
Bill is attempting to determine how much life insurance to purchase. He
has two dependent children and his wife does not work outside of the
home. An advisor suggested that Bill should consider Social Security
benefits when doing his life insurance planning. One concern in this
regard is the period after Social Security benefits to a widow terminate
until they resume again. This period is called the... - ANSWER -
blackout period
When using the needs approach, several "special needs" should be
considered. One special need is money to cover unexpected events, such
as major car repairs, dental bills, or home repairs. Money set aside for
this purpose is called a(n)... - ANSWER - emergency fund
Most family heads need substantial amounts of life insurance. However,
with limited income, money spent on life insurance reduces the amount
of discretionary income available for other high-priority needs. What an
insured person gives up when he or she purchases life insurance instead
pg. 1
,2|Page
of using the premium dollars for other purposes is called the... -
ANSWER - opportunity cost of buying life insurance
Which of the following statements about yearly renewable term
insurance is (are) true?
1. it requires evidence of insurability for renewal
2. it is most appropriate when an insured needs lifetime protection -
ANSWER - neither 1 or 2
What happens to the premiums for yearly renewable term insurance as
an insured gets older? - ANSWER - they increase at an increasing rate
Which of the following statements about term insurance is true? -
ANSWER - most policies can be renewed for additional periods without
evidence of insurability
Which of the following statements about a decreasing term insurance
policy is true? - ANSWER - the face amount of the policy decreases
during the policy period, but the premium remains level
The purchase of term insurance is justified by which of the following
circumstances?
1. the insured wants to save money through the policy for a specific
need
2. the insured has a temporary need for life insurance protection -
ANSWER - only 2
pg. 2
,3|Page
A legal reserve in life insurance is a result of... - ANSWER - excess
premiums in the early policy years being invested at compound interest
The net amount at risk for an ordinary life insurance policy is the
difference between the... - ANSWER - face amount of the policy and the
legal reserve
Which of the following statements about life insurance cash values is
(are) true?
1. Cash values are a result of the level premium method of purchasing
life insurance.
2. The cash value of a policy must always exceed the policy's legal
reserve. - ANSWER - only 1
Disadvantages of life insurance settlement options include which of the
following?
1. Higher yields can often be obtained elsewhere.
2. Life income options have limited usefulness at younger ages. -
ANSWER - both 1 and 2
Which of the following statements about the waiver-of-premium
provision in life insurance is true? - ANSWER - the disability must
occur before a stated age, such as 65, for premiums to be waived
Which of the following statements about the guaranteed purchase option
is true? - ANSWER - the additional coverage can be purchased without
demonstrating insurability
pg. 3
, 4|Page
Which of the following statements about the guaranteed purchase option
is true? - ANSWER - the options permit the insured to purchase
specified amounts of life insurance in the future even if the insured has
become uninsurable
Which of the following statements about a typical accidental death
benefit rider is (are) true?
1. Accidental injury must be the cause of death for the increased benefit
to be paid.
2. The accidental death must occur prior to some specified age for the
increased benefit to be paid. - ANSWER - both 1 and 2
Reasons for NOT purchasing an accidental death benefit rider include
which of the following?
1. Most people die as a result of a disease rather than from an accident.
2. The economic value of a human life is not increased if death occurs
because of an accident. - ANSWER - both 1 and 2
The cost-of-living rider typically bases increases in the policy face value
on changes in the... - ANSWER - consumer price index
Which of the following statements about accelerated death benefits
riders is (are) true?
1. The benefit paid is usually less than the full-face amount.
2. Several different medical conditions may trigger the payment of
benefits. - ANSWER - both 1 and 2
pg. 4
PRINCIPLES OF RISK MANAGEMENT AND
INSURANCE EXAM UPDATED 2025
COMPLETE EXAM| 200 ACTUAL EXAM
QUESTIONS WITH CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
The human life value is defined as the - ANSWER - present value of the
family's share of a deceased breadwinner's future earnings
Bill is attempting to determine how much life insurance to purchase. He
has two dependent children and his wife does not work outside of the
home. An advisor suggested that Bill should consider Social Security
benefits when doing his life insurance planning. One concern in this
regard is the period after Social Security benefits to a widow terminate
until they resume again. This period is called the... - ANSWER -
blackout period
When using the needs approach, several "special needs" should be
considered. One special need is money to cover unexpected events, such
as major car repairs, dental bills, or home repairs. Money set aside for
this purpose is called a(n)... - ANSWER - emergency fund
Most family heads need substantial amounts of life insurance. However,
with limited income, money spent on life insurance reduces the amount
of discretionary income available for other high-priority needs. What an
insured person gives up when he or she purchases life insurance instead
pg. 1
,2|Page
of using the premium dollars for other purposes is called the... -
ANSWER - opportunity cost of buying life insurance
Which of the following statements about yearly renewable term
insurance is (are) true?
1. it requires evidence of insurability for renewal
2. it is most appropriate when an insured needs lifetime protection -
ANSWER - neither 1 or 2
What happens to the premiums for yearly renewable term insurance as
an insured gets older? - ANSWER - they increase at an increasing rate
Which of the following statements about term insurance is true? -
ANSWER - most policies can be renewed for additional periods without
evidence of insurability
Which of the following statements about a decreasing term insurance
policy is true? - ANSWER - the face amount of the policy decreases
during the policy period, but the premium remains level
The purchase of term insurance is justified by which of the following
circumstances?
1. the insured wants to save money through the policy for a specific
need
2. the insured has a temporary need for life insurance protection -
ANSWER - only 2
pg. 2
,3|Page
A legal reserve in life insurance is a result of... - ANSWER - excess
premiums in the early policy years being invested at compound interest
The net amount at risk for an ordinary life insurance policy is the
difference between the... - ANSWER - face amount of the policy and the
legal reserve
Which of the following statements about life insurance cash values is
(are) true?
1. Cash values are a result of the level premium method of purchasing
life insurance.
2. The cash value of a policy must always exceed the policy's legal
reserve. - ANSWER - only 1
Disadvantages of life insurance settlement options include which of the
following?
1. Higher yields can often be obtained elsewhere.
2. Life income options have limited usefulness at younger ages. -
ANSWER - both 1 and 2
Which of the following statements about the waiver-of-premium
provision in life insurance is true? - ANSWER - the disability must
occur before a stated age, such as 65, for premiums to be waived
Which of the following statements about the guaranteed purchase option
is true? - ANSWER - the additional coverage can be purchased without
demonstrating insurability
pg. 3
, 4|Page
Which of the following statements about the guaranteed purchase option
is true? - ANSWER - the options permit the insured to purchase
specified amounts of life insurance in the future even if the insured has
become uninsurable
Which of the following statements about a typical accidental death
benefit rider is (are) true?
1. Accidental injury must be the cause of death for the increased benefit
to be paid.
2. The accidental death must occur prior to some specified age for the
increased benefit to be paid. - ANSWER - both 1 and 2
Reasons for NOT purchasing an accidental death benefit rider include
which of the following?
1. Most people die as a result of a disease rather than from an accident.
2. The economic value of a human life is not increased if death occurs
because of an accident. - ANSWER - both 1 and 2
The cost-of-living rider typically bases increases in the policy face value
on changes in the... - ANSWER - consumer price index
Which of the following statements about accelerated death benefits
riders is (are) true?
1. The benefit paid is usually less than the full-face amount.
2. Several different medical conditions may trigger the payment of
benefits. - ANSWER - both 1 and 2
pg. 4
