LIfe insurance premiumsWhich of the following would not be used to determine the premium rate for a life insurance policy? Select one: a. Mortality b. Interest earnings c. Loading d. Morbidity

Insurance companies need to set aside a certain amount of funds called reserves. Reserves are treated as a(n): Select one: a. Liability b. Benefit c. Premium d. Asset

a. Liability

Net single premium is: Select one: a. Mortality - Interest b. Loading + Gross Premium c. Interest - Gross Premium d. Mortality + Loading

a. Mortality - Interest

Which of the following statements correctly describes net single premium? Select one: a. Net single premium is mortality minus interest b. Net single premium is loading. c. Net single premium is loading and interest. d. Net single premium is the same as gross single premium.

a. Net single premium is mortality minus interest

Which of the following is true regarding level premiums? Select one: a. Policyholders are paying more premium than is needed in the early years of policy b. Policyholders are paying less premium than is needed in the earlier years of the policy. c. Level premiums can only be paid annually d. Level premiums are the only premium option

a. Policyholders are paying more premium than is needed in the early years of policy

Which factor is the most crucial for underwriting life insurance? Select one: a. Proposed insured's age b. Proposed insured's sex c. Proposed insured's place of residence d. Proposed insured's occupation

a. Proposed insured's age

Level premium life insurance policies usually have ______ premiums in order to account for the greater risk of death with advancing age. Select one: a. higher b. lower c. increasing d. decreasing

a. higher

Which of the following are the actuarial tables used by insurers for underwriting? Select one: a. Morbidity tables b. C.S.O. tables c. Insurable tables d. Risk pool tables

b. C.S.O. tables

Judas and John are identical twins. Judas and John go to the same insurance agent and end up buying the exact same policy. The only difference between their policies is: John pays his premiums monthly and Judas pays his premiums annually. Whose policy has higher premiums? Select one: a. Judas b. John c. Judas' and John's premiums are the same d. Not enough information is provided

b. John

Another term for insurers' expense is: Select one: a. Interest earnings b. Loading c. Morbidity d. Premium

b. Loading

All of the following statements are true regarding the premium payment mode, EXCEPT: Select one: a. If premiums are paid more frequently, the insurer incurs an additional loading expense. b. More frequent premium payments means lower premiums. c. Insurers accept premium payments annually, semi-annually, quarterly, monthly and weekly. Some insurers may accept a single lump-sum premium payment. This applies to life insurance. d. The premium payment mode is the frequency that premium payments are made.

b. More frequent premium payments means lower premiums.

Of the following terms, which best describes the rate at which men age 35 die? Select one: a. Morbidity b. Mortality c. Interest earnings d. Exclusion ratio

b. Mortality

Which of the following best describes the term, net single premium? Select one: a. Expense + Mortality b. Mortality - Interest c. Mortality + Loading d. Gross Premium + Loading

b. Mortality - Interest

Martin pays his policy premiums on a monthly basis. Which of the following terms best describes the frequency that Martin pays his premiums? Select one: a. Exclusion ratio b. Premium payment mode c. Net single premium d. Premium cycle

b. Premium payment mode

Premiums for life insurance purchased for charitable purposes are: Select one: a. Paid with after-tax dollars b. Tax-deductible c. Not tax-deductible d. Refunded to policyowners each year

b. Tax-deductible

Employer-paid premiums used to fund group life insurance for the benefit of employees are: Select one: a. Paid with after-tax dollars b. Tax-deductible as a business expense c. Not tax-deductible d. Refunded to employers each year

b. Tax-deductible as a business expense

Cash value is: Select one: a. The amount of future claims b. The savings portion of a whole life policy c. The present value of future premiums d. An insurer's reserves

b. The savings portion of a whole life policy

If an applicant's gross single premium is $2,000 and their net single premium is $1,700, what is the loading? Select one: a. $3,700 b. $2,300 c. $300 d. $200

c. $300

Premiums are invested to earn interest. __________ interest rates allow insurers to charge ________ premiums. Select one: a. Lower; lower b. Higher; higher c. Higher; lower d. Fixed; monthly

c. Higher; lower

Which of the following is not used to calculate the premium for life insurance contracts? Select one: a. Loading b. Interest c. Morbidity d. Mortality

c. Morbidity

Which of the following best describes the tool underwriters use to determine the rate at which a group of people die? Select one: a. Exclusion ratio grid b. Morbidity rate graph c. Mortality table d. None of the above

c. Mortality table

Generally, premiums paid on business life insurance policies are: Select one: a. Tax-deductible b. Paid with pre-tax dollars c. Not tax-deductible d. Refunded to policyowners each year

c. Not tax-deductible

Generally, premiums paid on individual life insurance policies are: Select one: a. Tax-deductible b. Paid with pre-tax dollars c. Not tax-deductible d. Considered a nontaxable refund

c. Not tax-deductible

If a life insurance policy's cash value is surrendered, what portion is taxable? Select one: a. The cost basis b. Premiums paid c. Portion that is interest d. No portion is taxable

c. Portion that is interest

All of the following are used in determining a life insurance policy's gross premium, EXCEPT: Select one: a. Mortality b. Loading c. Interest d. Morbidity

d. Morbidity

Which of the following would not be used to determine the premium rate for a life insurance policy? Select one: a. Mortality b. Interest earnings c. Loading d. Morbidity

d. Morbidity

Joan pays premiums quarterly. What is the term that describes the frequency that Joan pays her premiums? Select one: a. Mortality b. Loss ratio c. Premium payment cycle d. Premium payment mode

d. Premium payment mode

Insurers' expenses include all of the following costs, EXCEPT: Select one: a. Overhead b. Acquisition costs c. Immediate claims payments d. Premiums

d. Premiums

All of the following factors affect the premium amount for insurance policies, EXCEPT: Select one: a. Age b. Occupation c. Hobbies d. Sexual orientation

d. Sexual orientation

If a policyowner wants to pay the cheapest premiums, what premium payment mode should he use? Select one: a. Monthly b. Quarterly c. Annually d. Single premium payment

d. Single premium payment

In life insurance the risk of death increases with age, so premiums must be ______ in ______ years to account for this risk. Select one: a. lower; earlier b. higher; earlier c. lower; later d. higher; later

d. higher; later