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Insurance provides protection against economic loss by enabling the policy owner to            

• Transfer responsibility for the loss to others

• Take speculative risk to compensate for the loss

• Reduce the possibility of the occurrence of the event causing the loss

• Share the loss with others exposed to similar risk

When is the only instance a life insurance contract is treated primarily as an indemnity agreement?

• A person insures the life of a friend

• Creditor insures the life of his debtor to protect himself

• Person insures the life of his or her spouse to protect against the loss of income earned by the spouse

• Person in a partnership insures the life of his partner to protect the firm against loss due to the death of that partner

The following have a legitimate insurable interest except:

• An individual on his own life

• An individual on the life of his spouse

• A finance company on the life of its borrower

• An individual on the life of his mistress

Which of the following best describes Participating Life Insurance policies?

• Allow variation in the wording of certain provisions

• Provide for the distribution of dividends to the policy owner

• Develop profit which must be paid to stockholders

• Permit beneficiaries to exercise certain ownership rights during the lifetime of the insured

Which of the following sales practices determines a prospect's complete financial requirement before offering a policy?

• Planned selling

• Counselor selling

• Multiple products selling

• Total needs selling

A risk is considered substandard based on any or all of the following criteria

• Death, income, and educational attainment

• Death, occupation, and moral character

• Occupation, character, and family health history

• Income, educational attainment, occupation

The widow of your policyholder tells that she does not want a lump sum payment, but she would life to receive monthly allowance for the rest of her natural life. Which option do you recommend?

• Periodic annuity option

• Life annuity option

• Fixed period option

• Fixed income option

How are endowment life insurance and term life insurance the same?

• Build up cash value rapidly in the early policy years

• Provide for payment of the face amount if the insured is alive at the end of specified period

• Contain provisions for automatic continuation of the insurance protection at the end of a specified period

• Provide life insurance protection for only the period of time specified in the policy contract

Life insurance guarantees cash benefits for all the following except:

• Clean-up fund

• Family dependency period income

• Educational fund

• Mortgage

William chose a straight-premium whole life policy over a limited payment whole life policy. What is the advantage of such purchase?

• Liberal risk selection procedures

• Concentration of premium payments during the period of highest earnings

• More rapid accumulations cash values

• More insurance protection for the same annual premiums outlay