Life and Health Insurance Exam
Questions with 100% Correct Answers
Concept of insurance Correct Answer: The transfer of risk from one party to
another through a legal contract.
Law of Large Numbers Correct Answer: The larger the number of risks insured in
the same risk pool; the more predictable losses become.
Peril Correct Answer: An immediate, specific event that causes a loss.
Loss Correct Answer: An unintended, unforeseen reduction, or destruction of
financial or economic value.
Hazard Correct Answer: Creates an increased possibility that a peril (a cause of
a loss) will actually occur.
Occurrence Correct Answer: Is any event that causes a loss.
Risk Correct Answer: Risk is defined as thepotential or uncertainty for loss.
Speculative risk Correct Answer: A situation in which either profit or loss is
possible, not insured.
Industrial life insurance Correct Answer: Issues very small face amounts, such as
$1,000 or $2,000. Premiums are paid weekly and collected by debit agents. They
were designed for burial coverage.
Ordinary life insurance Correct Answer: Life insurance of commercial companies
not issued on the weekly premium basis. It is made up of several types of
individual life insurance, such as temporary (term), permanent (whole).
,Group life insurance Correct Answer: Insurance written for members of a group,
such as a place of employment, association, or a union. Coverage is provided
to the members of that group under one master contract. The group is
underwritten as a whole, not on each individual member. One of the benefits of
group life coverage is usually there is no evidence of insurability required.
Term life insurance Correct Answer: Life insurance that pays a death benefit if
the policyholder dies within a specific time period but has no remaining value at
the end of this time.
Whole life insurance Correct Answer: Sometimes called straight life insurance or
ordinary life insurance; can provide lifetime insurance coverage; in this case,
fixed premiums are paid for life; pays interest on the cash value portion with a
guaranteed minimum interest rate during life of the contract.
Joint survivor or last survivor life policies Correct Answer: Cover the lives of two
individuals and saves on premium costs by averaging the ages of the two
insureds. Joint Life Survivor or Last Survivor policies only pay the death benefit
upon the death of the last insured person. For example, say B and M purchase a
joint life survivor policy. If B were to die first and then M died 10 years later, no
benefits would be paid out from the policy until M died. A Joint Life and Survivor
policy covers two lives but only pays benefits after the death of the last insured.
Family maintenance policy Correct Answer: Pays a monthly income from the
date of death of the insured to the end of the preselected period.
Family income policy Correct Answer: Combines Whole Life insurance with a
Decreasing Term
Rider also written on the same person.
, Adjustable life policy Correct Answer: Whole life insurance policy, but you can
change your policy as your needs change. You can change your premium
payments to increase or decrease coverage.
Universal life insurance policy Correct Answer: Incorporates flexible premiums
and an adjustable death benefit. The investment gains from a Universal Life
Policy usually go toward the cash value. The policy owner can use the cash
value to manipulate the flexible aspects of a universal life insurance policy. A
customer who wants a policy that gives them the most options and the most
control would be looking for a Universal Life Policy. Universal policies use gains to
fund the cash value and give the policy owner options for flexible premiums
and adjustable death benefits.
Variable Life Insurance Correct Answer: Life insurance in which the benefits are
a function of the returns being generated on the investments selected by the
policyholder.
Equity index universal life insurance Correct Answer: Combines most of the
features, benefits, and security of traditional life insurance with the potential of
earned interest based on the upward movement of an equity index.
Cash value Correct Answer: The equity amount or "savings" accumulation in a
whole life policy.
Endowment policy Correct Answer: Is a contract providing for payment of the
face amount at the end of a fixed period, at a specified age of the insured, or
at the insured's death before the end of the stated period.
Face amount plus cash value policy Correct Answer: Contract that promises to
pay at the insured's death the face amount of the policy plus a sum equal to
the policy's cash value.
Questions with 100% Correct Answers
Concept of insurance Correct Answer: The transfer of risk from one party to
another through a legal contract.
Law of Large Numbers Correct Answer: The larger the number of risks insured in
the same risk pool; the more predictable losses become.
Peril Correct Answer: An immediate, specific event that causes a loss.
Loss Correct Answer: An unintended, unforeseen reduction, or destruction of
financial or economic value.
Hazard Correct Answer: Creates an increased possibility that a peril (a cause of
a loss) will actually occur.
Occurrence Correct Answer: Is any event that causes a loss.
Risk Correct Answer: Risk is defined as thepotential or uncertainty for loss.
Speculative risk Correct Answer: A situation in which either profit or loss is
possible, not insured.
Industrial life insurance Correct Answer: Issues very small face amounts, such as
$1,000 or $2,000. Premiums are paid weekly and collected by debit agents. They
were designed for burial coverage.
Ordinary life insurance Correct Answer: Life insurance of commercial companies
not issued on the weekly premium basis. It is made up of several types of
individual life insurance, such as temporary (term), permanent (whole).
,Group life insurance Correct Answer: Insurance written for members of a group,
such as a place of employment, association, or a union. Coverage is provided
to the members of that group under one master contract. The group is
underwritten as a whole, not on each individual member. One of the benefits of
group life coverage is usually there is no evidence of insurability required.
Term life insurance Correct Answer: Life insurance that pays a death benefit if
the policyholder dies within a specific time period but has no remaining value at
the end of this time.
Whole life insurance Correct Answer: Sometimes called straight life insurance or
ordinary life insurance; can provide lifetime insurance coverage; in this case,
fixed premiums are paid for life; pays interest on the cash value portion with a
guaranteed minimum interest rate during life of the contract.
Joint survivor or last survivor life policies Correct Answer: Cover the lives of two
individuals and saves on premium costs by averaging the ages of the two
insureds. Joint Life Survivor or Last Survivor policies only pay the death benefit
upon the death of the last insured person. For example, say B and M purchase a
joint life survivor policy. If B were to die first and then M died 10 years later, no
benefits would be paid out from the policy until M died. A Joint Life and Survivor
policy covers two lives but only pays benefits after the death of the last insured.
Family maintenance policy Correct Answer: Pays a monthly income from the
date of death of the insured to the end of the preselected period.
Family income policy Correct Answer: Combines Whole Life insurance with a
Decreasing Term
Rider also written on the same person.
, Adjustable life policy Correct Answer: Whole life insurance policy, but you can
change your policy as your needs change. You can change your premium
payments to increase or decrease coverage.
Universal life insurance policy Correct Answer: Incorporates flexible premiums
and an adjustable death benefit. The investment gains from a Universal Life
Policy usually go toward the cash value. The policy owner can use the cash
value to manipulate the flexible aspects of a universal life insurance policy. A
customer who wants a policy that gives them the most options and the most
control would be looking for a Universal Life Policy. Universal policies use gains to
fund the cash value and give the policy owner options for flexible premiums
and adjustable death benefits.
Variable Life Insurance Correct Answer: Life insurance in which the benefits are
a function of the returns being generated on the investments selected by the
policyholder.
Equity index universal life insurance Correct Answer: Combines most of the
features, benefits, and security of traditional life insurance with the potential of
earned interest based on the upward movement of an equity index.
Cash value Correct Answer: The equity amount or "savings" accumulation in a
whole life policy.
Endowment policy Correct Answer: Is a contract providing for payment of the
face amount at the end of a fixed period, at a specified age of the insured, or
at the insured's death before the end of the stated period.
Face amount plus cash value policy Correct Answer: Contract that promises to
pay at the insured's death the face amount of the policy plus a sum equal to
the policy's cash value.
