CLU HS 323 Quiz Questions

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CLU HS 323 Quiz Questions Group assets according to their risk characteristics and establishing criteria to maintain prescribed ratios of holdings in each of these risk categories is called (A) por... tfolio risk management (B) riding the yield curve (C) categorical investment (D) segmentation of the general account - ✔✔(D) segmentation of the general account Which of the following statements concerning current assumption whole life is correct? (A) It has a redetermination feature that reconfigures the premium amount in light of recent experience. (B) It is a variation of traditional whole life that provides no guarantees for the policy-owner. (C) Its cash value development is more like that of variable life than of any other policy. (D) It is participating insurance that has several unique dividend features - ✔✔(A) It has a redetermination feature that reconfigures the premium amount in light of recent experience. Which of the following statements concerning factors used in the selection and classification process of applicants for life insurance is correct? (A) Applicants must submit document proof of age as part of the application. (B) Any past health record of the applicant is of little real relevance in the selection process. (C) The determination of an applicant's mortality expectation involves an examination of the relationship between height, weight, and girth. (D) The influence of heredity may be most significant when evaluating a young person's application. - ✔✔(C) The determination of an applicant's mortality expectation involves an examination of the relationship between height, weight, and girth. 29. Which of the following reinsurance plans is proportional reinsurance? (A) a stop-loss agreement (B) a coinsurance agreement (C) a catastrophe agreement (D) a spread-loss agreement - ✔✔(B) a coinsurance agreement 30. Which of the following statements concerning the yearly renewable term plan of reinsurance is correct? (A) The primary company, rather than the reinsurer, is responsible for surrender values and policy loans. (B) The reinsurer is liable only for the portion of the policy death benefit equal to the reserve on the amount of insurance above the primary company's retention. (C) The reinsurer is responsible for holding the policy reserves. (D) The plan requires the primary company to transfer most of the premiums to the reinsurer and thus leads to a very slow growth in the primary company's assets. - ✔✔(A) The primary company, rather than the reinsurer, is responsible for surrender values and policy loans. 31. Which of the following statements concerning the NAIC model Holding Company Act is correct? (A) It contributes to the pressure on insurers to organize holding company systems in which the insurer is a subsidiary of the noninsurance parent company. (B) It requires that organizations seeking control of an insurer disclose relevant information and obtain the approval of the commissioner. (C) It establishes a 5 percent maximum dividend distribution to affiliated companies. (D) It permits the commissioner only to issue cease-and-desist orders to enforce the act. - ✔✔(B) It requires that organizations seeking control of an insurer disclose relevant information and obtain the approval of the commissioner. 32. Which of the following statements concerning the fundamental factors associated with getting new business is correct? (A) A low agent-retention rate should result in greater productivity per agent. (B) Persistency refers to the number of calls an agent makes per sale. (C) A high agent-retention rate avoids company expenses associated with new agent recruitment. (D) Agent productivity refers to the amount of premium dollars an agent generates per $1,000 of policy face amount. - ✔✔(C) A high agent-retention rate avoids company expenses associated with new agent recruitment. 34. Changes that have occurred in recent years with respect to life insurance company investments include which of the following? I. Bond investments have been heavily redirected away from public securities and toward directly negotiated deals with debtors. II. The average maturity of the nonmarketable part of long-term investments has been cut sharply. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(B) II only 35. Which of the following statements concerning training new agents is (are) correct? I. New agents generally require less supervision than veteran agents because they do not produce as much business. II. Sales quotas should be avoided because new agents do not have the necessary sales experience. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(D) Neither I nor II 36. Which of the following statements concerning the underwriting of life insurance is (are) correct? I. Urinalysis detection of excess sugar could lead to a higher premium or refusal to issue coverage. II. Detection of low blood pressure usually results in refusal to issue coverage. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(A) I only 37. Which of the following statements concerning adjustable life insurance is (are) correct? I. The adjustable life policy gives the policyowner the right to request and obtain a reconfiguration of the policy at specified intervals. II. The adjustable life policy offers all of the same guarantees regarding cash values, mortality, and expenses as traditional whole life policies do. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(C) Both I and II 38. Which of the following statements concerning substandard risk underwriting is (are) correct? I. The gross premium for a 200 percent extra percentage case will be 2 times the gross premium for a standard case. II. Deafness is an example of a constant hazard appropriately handled with a flat extra premium. (A) I only (B) II only (C) Both I and II (D) Neither I nor - ✔✔(B) II only 39. A 1992 study of policy illustrations by a task force of the Society of Actuaries concluded which of the following about policy illustrations? I. They work well to educate clients in the mechanics of how policies work. II. They are an adequate tool for comparing costs of policies from different insurance companies. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(A) I only 40. Which of the following statements concerning the readjustment period for survivors after a wage earner's death is (are) correct? I. The length of the period should be 6 months or less. II. The income during the period should be equal to the insured's gross earnings at the time of death. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(D) Neither I nor II 41. Which of the following statements concerning nonvariable life policy illustrations is (are) correct? I. They usually cover at least 10 years of data and often cover 15 or 20 years. II. Company illustrations can vary in content and format. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(C) Both I and II 42. Which of the following statements concerning a spendthrift clause is (are) correct? I. It keeps insurance proceeds under a settlement agreement from being reached by the beneficiary's creditors. II. It is enforceable when a policyowner elects a settlement option for his or her own benefit. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(A) I only 43. Which of the following statements concerning the calculation of net premiums for a nonrefund deferred whole life annuity purchased by a male aged 40 to begin annuity payments of $100 per year at age 65 is (are) correct? I. The net single premium can be calculated by using either the pure endowment approach or the general annuity approach. II. The net level premium is calculated by dividing the net single premium by the present value of a 25-year temporary life annuity due of one dollar per year calculated as of age 40. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(C) Both I and II 44. Which of the following statements concerning re-entry term insurance is (are) correct? I. The initial premium is based on an ultimate mortality table if the insured's health is better than average. II. Future premiums will be based on a select mortality table if satisfactory evidence of insurability is periodically provided. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(B) II only 45. Which of the following statements concerning the distribution of surplus is (are) correct? I. Each year a mutual company returns its surplus gains for that year in dividends to policyowners. II. The three-factor contribution plan is used by most companies because it refunds the excess payments of individual policyowners exactly and, therefore, provides total equity. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(D) Neither I nor II 46. Which of the following statements about marketing life insurance is (are) correct? I. Super producers have become a recognizable distribution approach. II. Many life insurers have been willing to experiment with new marketing approaches in an effort to increase efficiency. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(C) Both I and II 47. Which of the following purposes can be accomplished by using term insurance as collateral for a loan? I. Protection for the lender against loss resulting from the borrower's death II. Protection for the lender against the borrower's unwillingness or inability to repay the loan (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(A) I only 48. Which of the following statements concerning the use of mortality tables is (are) correct? I. Most major life insurance companies rely principally on either the mortality rates from the 1980 CSO Table or 2001 CSO Table for setting premium rates and dividend scales. II. Statutory mortality tables provide a minimum basis for the valuation of liabilities. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(B) II only 49. If the same mortality and interest assumptions are used, which of the following statements concerning reserves for a 10-payment whole life policy issued to a female aged 30 is (are) correct? I. The reserve computed under the Commissioners Reserve Valuation Method is greater than zero but less than the full net level premium reserve at the end of the first policy year. II. The reserve computed under the Commissioners Reserve Valuation Method is equal to the full net level premium reserve at age 45. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(C) Both I and II 50. Which of the following statements concerning a whole life insurance policy is (are) correct? I. The premium-paying period can be shorter than the insured's remaining lifetime. II. The insurance company retains the right of cancellation for the duration of the policy. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(A) I only 51. Which of the following statements concerning surrender options under universal life and variable universal life policies is (are) correct? I. These policies provide a nonguaranteed form of reduced paid-up option. II. These policies do not have a guaranteed extended term option. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(C) Both I and II 52. Which of the following statements concerning life insurance reserves is (are) correct? I. The initial reserve is used principally to determine dividends under participating policies. II. The prospective method of valuation is the approach most commonly used by actuaries to calculate reserves for flexible-premium policies. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(D) Neither I nor II 53. Which of the following statements concerning the higher rate of mortality associated with the issuance of nonmedical insurance is (are) correct? I. The extra mortality normally does not manifest itself until 20 to 25 years after the policy is issued. II. The extra mortality is believed to stem from impairments known to the applicant but deliberately concealed. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(B) II only 54. Which of the following statements concerning sources and uses of company surplus is (are) correct? I. Interest earnings greater than the assumed rate usually contribute the largest portion of insurer gains for policies that develop a cash value. II. Financing company growth generally presents the life insurer's largest internal demand for capital (surplus), regardless of whether it is a mutual or a stock company. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(C) Both I and II 55. Which of the following statements concerning the fixed-period settlement option is (are) correct? I. Prepaid premiums considered to be part of the proceeds may increase the payment amounts. II. Policy loans outstanding at the policy's maturity may shorten the time period over which payments are made. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(A) I only 56. Which of the following statements concerning universal life insurance premium payments is (are) correct? At no time is there a required minimum level of premium payment. Nearly every policy is issued with a target premium amount. (A) I only (B) II only (C) Both I and II (D) Neither I nor II - ✔✔(B) II only [Show More]

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