Life and Health Insurance Exam ACTUAL
QUESTIONS AND CORRECT ANSWERS
Concept of insurance - Correct answers✔The transfer of risk from one party to another through a
legal contract.
Law of Large Numbers - Correct answers✔The larger the number of risks insured in the same
risk pool; the more predictable losses become.
Peril - Correct answers✔An immediate, specific event that causes a loss.
Loss - Correct answers✔An unintended, unforeseen reduction, or destruction of financial or
economic value.
Hazard - Correct answers✔Creates an increased possibility that a peril (a cause of a loss) will
actually occur.
Occurrence - Correct answers✔Is any event that causes a loss.
Risk - Correct answers✔Risk is defined as thepotential or uncertainty for loss.
Speculative risk - Correct answers✔A situation in which either profit or loss is possible, not
insured.
,Industrial life insurance - Correct answers✔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 answers✔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 answers✔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 answers✔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 answers✔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 answers✔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 answers✔Pays a monthly income from the date of death of
the insured to the end of the preselected period.
, Family income policy - Correct answers✔Combines Whole Life insurance with a Decreasing
Term
Rider also written on the same person.
Adjustable life policy - Correct answers✔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 answers✔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 answers✔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 answers✔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 answers✔The equity amount or "savings" accumulation in a whole life
policy.
QUESTIONS AND CORRECT ANSWERS
Concept of insurance - Correct answers✔The transfer of risk from one party to another through a
legal contract.
Law of Large Numbers - Correct answers✔The larger the number of risks insured in the same
risk pool; the more predictable losses become.
Peril - Correct answers✔An immediate, specific event that causes a loss.
Loss - Correct answers✔An unintended, unforeseen reduction, or destruction of financial or
economic value.
Hazard - Correct answers✔Creates an increased possibility that a peril (a cause of a loss) will
actually occur.
Occurrence - Correct answers✔Is any event that causes a loss.
Risk - Correct answers✔Risk is defined as thepotential or uncertainty for loss.
Speculative risk - Correct answers✔A situation in which either profit or loss is possible, not
insured.
,Industrial life insurance - Correct answers✔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 answers✔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 answers✔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 answers✔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 answers✔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 answers✔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 answers✔Pays a monthly income from the date of death of
the insured to the end of the preselected period.
, Family income policy - Correct answers✔Combines Whole Life insurance with a Decreasing
Term
Rider also written on the same person.
Adjustable life policy - Correct answers✔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 answers✔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 answers✔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 answers✔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 answers✔The equity amount or "savings" accumulation in a whole life
policy.
