DC LIFE AND HEALTH INSURANCE FINAL EXAM REVIEW 2025|159 QUESTIONS
WITH ACCURATE SOLUTIONS
1. In what way is an insurance contract unilateral?
Only one party (the insurer) makes a promise that is enforceable
by law
Neither party may be forced to comply with policy terms
The insured has a choice of insurers
Only one party (the Insured) makes a promise that is enforceable
by law
2. In a scenario where a policyholder pays a premium for a life insurance
policy but does not pass away during the policy term, how does this
exemplify the concept of aleatory contracts?
The contract becomes void if the policyholder does not pass
away.
The policyholder receives a guaranteed refund of premiums paid.
The policyholder's payments do not equate to the insurer's
payout, demonstrating the unequal exchange of value.
The insurer must pay out regardless of the policyholder's status.
3. Describe how the State Guaranty Association functions in relation to
policyholders.
The State Guaranty Association ensures that policyholders are
compensated if their insurance company becomes insolvent.
The State Guaranty Association provides legal representation for
policyholders.
,The State Guaranty Association offers investment opportunities to
policyholders.
, The State Guaranty Association sets the premiums for insurance
policies.
4. What type of contract is characterized by a take-it-or-leave-it offer made
by one party?
Adhesion contract
Aleatory contract
Unilateral contract
Bilateral contract
5. Describe the financial advantage of choosing a term policy over other
types of insurance policies.
Term policies provide lifelong coverage regardless of health
changes.
Term policies offer the greatest amount of coverage for the
lowest premiums, making them more affordable for short-term
needs.
Term policies require higher premiums than whole life policies.
Term policies accumulate cash value over time unlike whole life
policies.
6. What is the name of the provision that allows a policyholder to use cash
value to pay premiums?
Automatic premium loan provision
Nonforfeiture option
Grace period provision
Waiver of premium provision
, 7. What is the term used to describe the conversion of a mutual insurance
company into a stock insurance company?
Mutualization
Demutualization
Capitalization
Reorganization
8. Describe the significance of cash value in a whole life insurance policy.
Cash value is the initial investment made by the policyholder.
Cash value is the total amount paid in premiums over the life of
the policy.
Cash value is the amount the insurance company pays upon the
policyholder's death.
Cash value represents the savings component of a whole life
policy that can be accessed by the policyholder.
9. If an Insured temporarily conveys some of the rights of policy ownership
to a lender to help secure a loan, what is this called?
Collateral Assignment (This is a temporary collateral
assignment. When the debt is paid to the creditor, the creditor
will "reassign" the policy's ownership back. Therefore, this is a
"temporary" collateral assignment, not a permanent
assignment.)
Revocable Transfer
Irrevocable Bequest
Absolute Assignment
10. Describe the concept of 'Limited Pay Whole Life insurance' and how it
differs from other types of life insurance policies.
WITH ACCURATE SOLUTIONS
1. In what way is an insurance contract unilateral?
Only one party (the insurer) makes a promise that is enforceable
by law
Neither party may be forced to comply with policy terms
The insured has a choice of insurers
Only one party (the Insured) makes a promise that is enforceable
by law
2. In a scenario where a policyholder pays a premium for a life insurance
policy but does not pass away during the policy term, how does this
exemplify the concept of aleatory contracts?
The contract becomes void if the policyholder does not pass
away.
The policyholder receives a guaranteed refund of premiums paid.
The policyholder's payments do not equate to the insurer's
payout, demonstrating the unequal exchange of value.
The insurer must pay out regardless of the policyholder's status.
3. Describe how the State Guaranty Association functions in relation to
policyholders.
The State Guaranty Association ensures that policyholders are
compensated if their insurance company becomes insolvent.
The State Guaranty Association provides legal representation for
policyholders.
,The State Guaranty Association offers investment opportunities to
policyholders.
, The State Guaranty Association sets the premiums for insurance
policies.
4. What type of contract is characterized by a take-it-or-leave-it offer made
by one party?
Adhesion contract
Aleatory contract
Unilateral contract
Bilateral contract
5. Describe the financial advantage of choosing a term policy over other
types of insurance policies.
Term policies provide lifelong coverage regardless of health
changes.
Term policies offer the greatest amount of coverage for the
lowest premiums, making them more affordable for short-term
needs.
Term policies require higher premiums than whole life policies.
Term policies accumulate cash value over time unlike whole life
policies.
6. What is the name of the provision that allows a policyholder to use cash
value to pay premiums?
Automatic premium loan provision
Nonforfeiture option
Grace period provision
Waiver of premium provision
, 7. What is the term used to describe the conversion of a mutual insurance
company into a stock insurance company?
Mutualization
Demutualization
Capitalization
Reorganization
8. Describe the significance of cash value in a whole life insurance policy.
Cash value is the initial investment made by the policyholder.
Cash value is the total amount paid in premiums over the life of
the policy.
Cash value is the amount the insurance company pays upon the
policyholder's death.
Cash value represents the savings component of a whole life
policy that can be accessed by the policyholder.
9. If an Insured temporarily conveys some of the rights of policy ownership
to a lender to help secure a loan, what is this called?
Collateral Assignment (This is a temporary collateral
assignment. When the debt is paid to the creditor, the creditor
will "reassign" the policy's ownership back. Therefore, this is a
"temporary" collateral assignment, not a permanent
assignment.)
Revocable Transfer
Irrevocable Bequest
Absolute Assignment
10. Describe the concept of 'Limited Pay Whole Life insurance' and how it
differs from other types of life insurance policies.
