Life Insurance Premiums Quiz

Which of the following best describes the term, net single premium?

Gross Premium - Loading

Employer-paid premiums used to fund group life insurance for the benefit of employees are:

Tax-deductible as a business expense

Premiums are invested to earn interest. __________ interest rates allow insurers to charge ________ premiums.

higher;lower

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

Morbidity

Which of the following is not used to calculate the premium for life insurance contracts?

Morbidity

Of the following terms, which best describes the rate at which men age 35 die?

Mortality

To determine the premium rate for health insurance policies, all of the following are used, EXCEPT: Interest Earnings Morbidity Loading or

Mortality

Net single premium is:

Mortality - Interest

Which factor is the most crucial for underwriting life insurance?

Proposed insured's age

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

Sex Orientation

If a policyowner wants to pay the cheapest premiums, what premium payment mode should he use?

Single premium payment

Cash Value is:

The savings portion of a whole life policy

Which of the following are the actuarial tables used by insurers for underwriting?

C.S.O Tables

Another term for insurers' expense is:

Loading

If a life insurance policy's cash value is surrendered, what portion is taxable?

Portion that is interest

A person with this risk classification will have a discounted premium from the rates provided in the C.S.O. tables

Preferred

Insurance companies need to set aside a certain amount of funds called reserves. Reserves are treated as a(n):

Liability

Which of the following best describes the tool underwriters use to determine the rate at which a group of people die?

Mortality Table

Premiums for life insurance purchased for charitable purposes are:

Tax-deductible

If an applicant's gross single premium is $2,000 and their net single premium is $1,700, what is the loading?

Therefore, the gross single premium minus the net single premium yields the loading: ($2,000 - $1,700 = $300). The loading is $300. The correct answer is: $300

Level premium life insurance policies usually have ______ premiums in order to account for the greater risk of death with advancing age.

Higher

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. 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.

More frequent premium payments means lower premiums.

Life insurance rates, or premiums, are calculated based on three factors:

Mortality, Interest Earnings & Expenses

Which of the following statements correctly describes net single premium?

Net single premium includes mortality and interest.

In life insurance the risk of death increases with age, so premiums must be ______ in ______ years to account for this risk

higher;later

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?

monthly payments

Generally, premiums paid on business life insurance policies are:

Not tax-deductible

Generally, premiums paid on individual life insurance policies are:

Not tax-deductible

Joan pays premiums quarterly. What is the term that describes the frequency that Joan pays her premiums?

Premium Payment Mode

Martin pays his policy premiums on a monthly basis. Which of the following terms best describes the frequency that Martin pays his premiums?

Premium payment mode

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

Premiums