PCE Practice Questions 1

PCE Practice Questions 1

Chapter 1 1. " By spreading the risk of loss faced by a specific person or enterprise, all parties who pool their

resources to pay for individual losses." This statement refers to ...

A. agent

B. insurance

C. warranty

D. broker 2. How does the insurance provide protection?

A. by transfer the risk to other parties' shoulder

B. eliminate the risk by the concept of pooling of risk

C. help people to gain profit

D. insure all types of risk 3. Insurance can be classified into...

A. Life Insurance

B. General Insurance

C. A & B

D. Risk Insurance 4. What is the Law of Large Number?

A. Large number of similar loss exposure

B. Loss exposure must be independent

C. Random or chance occurrence of losses

D. All of the above 5. Which risk is not covered by Life Insurance?

A. Premature death

B. Continuous stream of income during retirement

C. Sickness or disability

D. Suicide

6. Malaysian Insurance Business is control by...

A. Insurance Act, 1963

B. Insurance Act, 1996

C. Insurance Act, 1966

D. None of the above 7. The role of an insurance agent...

A. bring financial relief in the event of property loss

B. inculcate the discipline of savings among the working population

C. bring financial relief to aggrieved dependants of insured people who meet with an untimely death

D. All of the above


8. Risk cover by Life Insurance...

A. Premature death

B. Continuous stream of income during retirement

C. Sickness or disability

D. All of the above

Chapter 2 1. What is the cause of loss?

A. Hazard

B. Peril

C. Risk

D. Sick

2. is determined when the total number of possible events are known.

A. Judgmental probability

B. Empirical probability

C. Priori probability

D. Risk

3. When a person knows that he is suffering from a disease but he still has the intention to hide

this fact from the insurance company, this is called...

A. anti-selection

B. moral hazard

C. physical hazard

D. peril 4. The insurance insure the following risk except...

A. property damage

B. premature death

C. sickness and disability

D. investment and betting 5. Pure Risk is defined...

A. lost investment in stock market

B. lost betting in a horse race

C. unprofitable in business venture

D. risk of premature death

6. Which of the following is NOT a Pure Risk?

A. Fire

B. Flood

C. Robbery

D. Gambling


7. Moral Hazard defined...

A. dishonesty

B. carelessness

C. unreasonableness

D. All of the above 8. Which of the following bodies is NOT a characteristic of an insurance risk?

A. It must be of a fortuitous nature

B. It must be speculative in nature

C. It must be a pure risk

D. It must not be against public policy 9. The least effective approach to risk management...

A. Ignoring the risk

B. avoiding the risk

C. transferring the risk

D. retaining the risk 10. The characteristics of insurable risk...

A. financial value

B. large number of similar risk

C. pure risk only

D. All of the above

11. Which one among the occupations stated below is non-hazardous?

A. Cook

B. Trapeze artist

C. Forklift operator

D. Long distance bus driver 12. As an entrepreneur, you may encounter one of the following situations...

A. pure risk

B. no risk

C. pure and speculative risk

D. speculative risk


13. In the practice of his profession, an underwriter is concerned with the assessment of risk. His

assessment will almost exclusively be based on the consideration of both physical and moral

hazards. Factors influencing the physical hazard would include:

I. The health of the proposed insured

II. The family of the proposed insured

III. The age of the proposer

A. I & II

B. II & III

C. All of the above

D. I only 14. Which of the following methods of handling risk is closest to insurance?

A. Risk retention

B. Loss prevention and control

C. Transfer of risks

D. Risk avoidance

15. Which of the following CANNOT be insured?

A. To protect one's investment in case of depression

B. To protect one's car from being stolen

C. To protect one's house when there is a fire

D. To protect one's loss of income when disabled in an accident 16. What do you understand by fortuitous losses?

A. An accident brought about intentionally by the insured

B. Losses that occur due to wear and tear and depreciation

C. The loss is not within the control of the insured

D. An incident that occurs as expected 17. The selection of lives is a process of identifying the adverse factors. These factors are broadly classified into two categories. They are...

I. physical hazards

II. natural hazards

III. catastrophic hazards

IV. moral hazards

A. I & II

B. III & IV

C. I & IV

D. I, II, III & IV


Chapter 3 1. In Life Insurance, insurable interest must exist...

A. at the time of loss

B. at the beginning only

C. at the beginning and at the time of loss

D. at the time when the contract has been in force 2. What is material fact?

A. Is a fact which influence in deciding the acceptance of risk

B. The property that insured under a policy

C. Is a fact that helps to compensate

D. Is anti-selection

3. The consequence of breach of utmost good faith:

A. a contract becomes void

B. a contract becomes voidable until the insurance company treats it void

C. a contract becomes unenforceable

D. a contract still in force 4. Life Insurance is NOT ...

A. a contract of indemnity

B. a valued contract

C. insured the life of a human being

D. reduction of losses 5. Life Insurance is NOT a contract of indemnity because...

A. the insurable interest cannot be measured and cannot restore the insured to the

same financial position

B. it involves a large number of money

C. it is very unpredictable

D. it gives extra proceeds to the insured

6. Breach of utmost good faith may occur in the following ways:

I. By concealment

II. By non-disclosure

III. By innocent misrepresentation

IV. By fraudulent misrepresentation

A. I, II & III

B. I, III & IV

C. II, III & IV

D. All of the above


7. The principle of Utmost Good Faith is that...

A. the insured has to disclose some important facts regarding the risk to be insured

B. the insured has to disclose partial important facts regarding the risk to be insured

C. the insured has to disclose all important facts regarding the risk to be insured

D. All of the above 8. The principle of indemnity requires the insurers to...

A. restore the insured to the same financial position as he had enjoy immediately before the lost

B. restore the insured to better financial position as he had enjoy immediately before the lost

C. restore the insured to the same financial position as he had enjoy immediately after the lost

D. All of the above 9. Which of the following is CORRECT about Utmost Good Faith?

I. It is a contract of uberrimae fides

II. It is binding on the insurer

III. It is binding on the insured

IV. It is binding on the agent who sold the life policy

A. II & IV only

B. I, II & III only

C. I, II, III & IV

D. I & II only

10. It is the duty to the proposer to disclose clearly and accurately all material facts relating to the insurance

proposed. Material facts, in this instance, would include:

I. Facts which tend to render a risk proposed greater than normal

II. Facts necessary to explain the exceptional nature of a risk proposed for insurance, without

which, the insurer would justifiably believe

III. the risk to be normal

IV. The proposer's medical history

V. The proposer's occupation

A. I & II only

B. I, II & III

C. I, III & IV

D. I, II, III & IV 11. A person effecting a Life Insurance policy on his own life has an insurable

interest which is...

A. unlimited

B. limited to his annual income

C. dependent on his saving capacity

D. dependent on his state of health


Chapter 4 1. The company that owns by the shareholders are...

A. insurance company

B. proprietary company

C. cooperative company

D. mutual company 2. Who will prove the losses and investigate the cause?

A. insurance company

B. agent

C. loss adjuster

D. loss assessor 3. Recruiting, training of employees is a job of...

A. Marketing Department

B. Administration Department

C. Investment Department

D. Customer Service Department 4. Centralization means...

A. the underwriting, renewals etc will be handled at branches

B. no more branches

C. the underwriting, renewals etc will be handled at headquarters

D. the headquarter will act as a sale outlet too 5. This person works for the insurance company and his primary responsibility is to access all applicants

to determine the risk they present to the company and to decide whether to accept these applicants,

A. Underwriter

B. Claims Executive

C. Medical Examiner

D. Accountant 6. The association established to protect the interest of insurance brokers is...

A. IBAM

B. NAMLIA

C. PIAM

D. LOMA 7. Who among the following is NOT the main component of the market for private

insurance?

A. Buyers

B. Underwriters

C. Sellers

D. Intermediaries


8. Who among the following are termed as the intermediaries in the insurance business?

I. Adjuster

II. Agent

III. Broker

IV. Underwriter

A. I & II only

B. I & IV only

C. II & III only

D. III & IV only

Chapter 5 1. To instill a better level of discipline and professionalism in the work force in insurance, the company

established...

A. Code of Utmost Good Faith

B. Code of Ethics and Conduct

C. PIAM

D. LIAM 2. Which of the following statements are consumers' basic rights?

I. Right to satisfaction

II. Right to choose

III. Right to redress

IV. Right to a safe & clean environment

A. I & II

B. I & III

C. I, II & III

D. All of the above 3. The objective of the Insurance Mediation Bureau is to...

A. undertake research in the field of insurance and other related subjects

B. safeguarding the interest of those engaged in Life Insurance selling and sales management

C. provide dispute resolution procedure for policyholders (Personal Insurance only) and insurers

D. establish a sound insurance structure in Malaysia 4. The main purpose of the guarantee scheme fund established under the Insurance Act is:

A. to meet the liabilities of an insolvent insurance company

B. to ensure all insurance companies insolvent

C. to pay the liabilities of an insurance company

D. to ensure all insurance companies are solvent


Chapter 6

1. Under the Insurance Act, 1963, a person attaining the following age are allowed to enter into a contract

for a life policy.

A. 10 B. 18 C. 21 D. 16

2. Select all of the following statements which are true.

I. A contract is legal that is, it can be enforced by law

II. A contract is legal only when both parties voluntarily live up to the terms of the

agreement

III. A contract involves two or more parties

IV. Consideration must be a part of the agreement

A. I & III only

B. II & III only

C. I, III & IV only

D. All of the above 3. An agent is encouraged to collect premium from the proposer for submission together with the proposal

form. Why?

A. To ensure that proposer will not change his mind since he has pay the

premiums

B. The risk will not commence unless the first installment premium is paid

C. This will save the agent the additional trip of collecting the premium at another time

D. The commission from the premium will help the agent to cover his expenses incurred in

the prospecting 4. Which of the following accepts part of the risk from another insurer?

A. Reinsurers

B. Loss adjusters

C. Insurance agents

D. Insured

5. When can a Life Insurance Company void a life policy?

A. When an unpaid policy loan, plus interest, equals the cash value of the policy

B. When an unpaid policy loan, plus interest, equals the face value of the policy

C. When the policy owner ceases to make payments on the loan

D. When the policy owner ceases to exist 6. Which of the following is NOT a requirement for the formation of a valid contract?

A. Offer and acceptance

B. Legality of object

C. Financial capacity

D. intention to create legal relationship


7. One of the essential elements in the formation of a contract is consideration.

In insurance contract, consideration refers to the...

I. premium paid by the insured

II. commission paid to the agent

III. promises made by the insurer under the life insurance contract to pay the sum insured and

any accrued bonuses

A. I only

B. I & III only

C. II & III only

D. All of the above 8. A Life Insurance Policy is a contract between...

A. the life office and insured

B. the life office and beneficiary

C. the life office, insured and beneficiary

D. the life office, insured and beneficiary and the agent

Chapter 7 1. The duty of an agent includes...

A. to render accounts to the principle as required

B. not to disclose confidential information obtained during the course of his duties

C. not to delegate his duties to sub-agents without authority

D. All of the above 2. The agent can represent general insurance company

A. 1

B. 4

C. 2

D. more than 1 3. Who is a universal agent?

A. One who is appointed to do a specific act or transaction

B. One who may do anything for his principal within the limits of a general authority conferred

upon him

C. One who has unlimited authority

D. None of the above

4. An agency relationship may be created by the following way(s): I. By implication of law

II. By express appointment

III. By subsequent ratification of an agent's unauthorized act

A. I only

B. I & II only

C. I & III only

D. All of the above


5. An agency may be terminated by the following acts EXCEPT one:

A. The principal receiving many complaints

B. The agent renouncing the agency

C. The principal revokes the authority

D. The insurance company becoming bankrupt

6. The duty of an agent includes:

A. Comply with his principal's instructions and to notify him when compliance becomes impossible

B. Delegate his duties to a sub-agent without authority, whether express or implied

C. Let his own interest conflict with his obligation to the principal whenever possible

D. Take secret profit from his client 7. An agent is a person who acts on behalf of another person. The person whom he represents is

called the...

A. insured

B. third party

C. principal

D. broker 8. An agent of a life company is authorised to...

A. issue policies binding on the company

B. print premium receipt

C. solicit business, collect the initial premium and pays it to the company

D. get commission from the company

Chapter 8

1. Grace period is a term of the contract that a due premium shall be paid on the date specified. It

consists of days.

A. 15 B. 16 C. 30 D. 60

2. Salesmanship is ……………………………

A. an art of public speaking

B. a skill in opening an insurance agency business

C. the art of convincing people to purchase something

D. an art of acting


3. What characteristics does a market-oriented agent have?

I. Satisfying customer requirements

II. Satisfying customer needs

III. Profit making

IV. Policy distribution

A. I only

B. I & II only

C. I, II & III only

D. All of the above

4. Marketing emphasises...

A. planning and controlling

B. product development

C. improved services to customers

D. All of the above 5. Basic marketing decision for an agent includes the following EXCEPT

A. personnel selling

B. measuring of results

C. the submission of accounts

D. proposing proper plan for client

6. A professional agent must be trained to...

A. close a business

B. handle objections

C. conduct sale interviews

D. All of the above 7. The requirements an agent must be prepared to meet in order to be successful are:

I. knowledge

II. proper selling attitude

III. professional attitude

IV. skills

A. I, II & III only

B. I, II & IV only

C. All of the above

D. I & II only


Chapter 16 1. Insurable interest in Life Insurance needs to exist only...

A. at the time of claim

B. at the time of surrender

C. at the time of inception of the insurance

D. at the time of changing the beneficiaries 2. A life insurance contract is a contract of...

A. premature death

B. financial guarantees

C. permanent disability

D. uberrima fides (Utmost Good Faith) 3. An insurance contract must have 'insurable interest' as required by the...

A. Insurance Act, 1962

B. Insurance Act, 1963

C. Life Insurance Act, 1963

D. Insurance Act for life 1963 4. If no insurable interest exists at the time a life policy is effected, the policy becomes...

A. void, the company is not obliged to pay a claim under the policy

B. voidable, the company may or may not be obliged to pay a claim under the policy

depending on the discretion of the management

C. voidable, depending on the judgement of the high court D. Unenforceable, the company is not obliged to pay a claim

5. The purchaser of life insurance must stand to suffer a legal financial loss on the death of the

other person on whom he buys the insurance. This is known as:

A. Utmost Good Faith

B. Common Law

C. Insurable interest

D. Insurance Act 1963 6. The risks covered by life insurance included the following EXCEPT...

A. retirement benefit

B. premature death

C. financial loss

D. permanent disability


Chapter 17 1. contract pays out a lump sum on the diagnosis of any of a number of specified diseases.

A. Permanent Health

B. Dread Disease Cover

C. Personal Accident

D. Term

2. Three kinds of Life Insurance contract: I. Home service

II. Group insurance

III. Ordinary

IV. Health policy

A. I, II & III only

B. II, III & IV only

C. I & III only

D. All of the above 3. What is term insurance?

I. The earliest life insurance

II. The sum assured is payable only in the event of death of the life assured

III. The sum assured is payable only if the life assured survives the term

IV. Can convert it to whole life and endowment

A. I & II only

B. II & III only

C. II, III & IV only

D. I, II & IV only

4. It is used for the dual purpose of providing for old age or augmenting pension and for protection of the

family's interest.

A. Limited Whole Life Insurance

B. Decreasing Term Insurance

C. Endowment Assurance

D. Increasing Investment

5. In this policy, the office makes a series of payment to the annuitant, this policy is called...

A. term insurance

B. annuity

C. whole life

D. endowment


6. The insurer will pay the policyholder with installment cash during the term of the policy, if the

policyholder survives till the end of the term, he will be paid only the balance of the installment

payment, usually 50%. The benefit of this policy is the full sum assured is payable in the event of the

life insured's death. This policy called...

A. whole life

B. anticipated endowment

C. term insurance

D. annuity 7. provides guaranteed payment over fixed period and thereafter till death. If the annuitant

dies during the fixed period, the annuity payment will continue to be paid till the end of the

guaranteed period.

A. Deferred annuity

B. Single life immediate annuity

C. Guaranteed immediate annuity

D. Annuity certain

8. In a group insurance, a minimum number of lives to be insured are...

A. 100 B. 10 C. 5 D. 50

9. Family Takaful Plans may elect to incorporate the following supplementary benefits:

I. Takaful Mortgage

II. Health and Medical Takaful Plan

III. Personal Accident

IV. Takaful plan for education

A. I, II & III only

B. III only

C. I only

D. IV only 10. Under the "Group Insurance Scheme", the parties to contract are the...

A. employers and the employees

B. employees, employer and the insurance company

C. employer and the insurance company

D. beneficiary, employees, employer and the insurance company 11. A term policy is also sometimes known as 'temporary assurance'. Which of the following statements is

true?

A. Provides protection for an unlimited period of time

B. Premiums are comparatively higher

C. A small cash value is payable at the expiry of the term

D. Sum assured is not payable if life assured survives the term


12. Term Insurance is useful when...

A. buyer has a need for insurance but cannot afford the premiums of permanent plans

B. buyer has a need for insurance but does not feel it is important

C. buyer has a huge tax bill to pay

D. agent has run out of products to sell

13. Participating (PAR) policies can only be bought with the following types of life policies:

I. Whole Life

II. Endowment

III. Term

IV. Annuity

A. I , II, III only

B. I , II, IV only


D. All of the above 14. "Premium are paid for a limited number of years after which the policy becomes paid-up for its full

amount and no further premiums are required." The paragraph above describes...

A. this member leaves the group

B. endowment policies

C. renewable term policies

D. investment linked policies 15. An endowment life insurance policy differs from a term life insurance policy in that the endowment

policy provides...

A. for only death cover during the term of insurance

B. no cash value at any time during the period of coverage

C. for payment of the face amount, if the insured is still living at the end of the period of

coverage

D. for an automatic conversion of the policy, if the insured is still living at the end of the period of

coverage 16. Policies generally issued for the purpose of mortgage protection are usually in the nature of...

A. Whole Life Insurance

B. Increasing Term Insurance

C. Decreasing Term Insurance

D. Convertible Term Insurance 17. A life insurance contract written on two or more lives is called...

A. Co-Life Policy

B. Twin-Life Policy

C. Joint-Life Policy

D. Group Insurance Policy


18. "Accidental Death Benefit" is a form of...

A. basic benefit

B. permanent benefit

C. temporary benefit

D. supplementary benefit 19. Under the Family Takaful Plans, the amount credited into the participant's account and the

participant's special account is made with the intention of, EXCEPT...

A. paying annual cost of Takaful against the covered risk

B. saving and investment

C. payment of benefits to the poor who are not participants of the plan

D. payment of Takaful benefits to the heir of any participant who may die before reaching the

term of the plan 20. The provision which allows the policy owner to change in the plan of insurance from term

life insurance to whole life insurance is commonly referred as the...

A. reinstatement provision

B. renewal provision

C. conversion provision

D. policy provision 21. As a result of an accident, Mr.Koh was totally disabled for 26 months. During that time, a special

provision in his whole life insurance policy exempts him from making premium payments, while the full insurance coverage continues in force. The provision in Mr.Koh's policy which exempts him from paying premium is called the...

A. disability income benefit

B. accidental means benefit

C. waiver of premium for disability benefit

D. dread-disease benefit

22. What are supplementary benefits?

A. These are benefits or riders attached to the basic policies subject to the payment of extra

premiums

B. These are benefits such as bonuses given out on participating policies

C. These are benefits given to better-than average lives

D. These are benefits that comes with the basic plan


Chapter 18 1. This policy permits the insured to exchange the acquire cash value for a paid-up term insurance. The

term insurance depends on the available amount of cash value applied. This policy is...

A. paid up policy

B. extended term assurance

C. endowment insurance

D. annuity 2. If the insured commits suicide within a stated period of time,

A. the insurance company is not liable to pay any claim and premium paid

B. the insurance company is not liable to pay any premium paid

C. the insurance company is liable to refund all premium paid

D. the insurance company is not liable on anything 3. If there has been a misrepresentation of age, the following measures could be adopted:

A. if the age has been overstated, the company will not liable on anything

B. if the age has been overstated; the amount of money payable would be treated as the

premium paid according to the true age

C. the contract will become void

D. the insured needs to reinstate the policy again 4. Policy alterations include:

I. decrease the sum assured

II. increase the sum assured

III. change of name of beneficiary

IV. change of class of policy

A. I & II only


C. I, II & III only

D. I, III & IV only

5. The following documents are NOT accepted as proof of age in Malaysia.

A. School leaving certificate

B. identity card

C. certificate of baptism

D. credit card 6. An assignment of a life policy is a transfer of...

A. equitable interest only

B. ownership and legal rights

C. risk from life assured to assignee

D. beneficial interest only


7. The cash value of a life insurance policy is the amount of money the insurance company...

A. guarantees to pay the beneficiary

B. may be prepared to grant as a loan on security of the policy

C. guarantees to pay the policy owner if the policy is surrendered before its maturity

D. must hold in assets in order to be able to pay a policy claim whenever it is due 8. A provision in a life insurance policy which states that any premium not paid by the end of the

grace period is automatically paid by a policy loan if there is sufficient cash value is called...

A. renewal provision

B. automatic premium loan

C. reinstatement provision

D. automatic paid-up provision 9. Some of the alterations that can be made to a life policy are listed below. Which of these are true?

I. Reduction in the sum assured

II. Change in the mode of premium payment

III. Increase in the sum assured

IV. Change of name of the life assured

A. I, II & III only

B. I, II & IV only

C. II & III only

D. All of the above

10. The incontestability clause in a life insurance policy is intended to...

A. limit the time during which the policy owner has the right to cancel the policy

B. limit the time during which the insurance company can deny claims on the basis

of statements made in the application

C. prevent delay on the part of the insurance company in the payment of legitimate

claims

D. provide for time limit for the proposer to challenge the underwriter's decision

under his proposal

11. A lapsed policy is one for which the...

A. policy owner made the premium payment during the grace period

B. policy owner has failed to make the premium payment within the grace period

C. premium has not been paid during the last 30 days of the policy period

D. policy owner has failed to pay premium after the 30 days period 12. Most life insurance contracts include a provision which states that if the person whose life is insured

dies by suicide within a specified period, the...

A. company will ignore the cause of death and settle the claim

B. company has no liability whatsoever

C. liability of the company is limited to the amount of the premium paid

D. liability of the company is limited to the cash value of the policy at the time of

death


13. A policy owner wants to discontinue paying the premiums on a life insurance policy, but wishes to

retain life insurance coverage for the same period and on the same plan as provided by the original

policy. The non-forfeiture option which the policy owner should select is the...

A. Extended Term Insurance Option

B. Reduced Paid-Up Insurance Option

C. Fixed-Period Option

D. Automatic Premium Loan

14. Which one of the following statements about "days of grace" is NOT true?

A. Interest will be charged for payment of premium within the period

B. Interest will not be charged for payment of premium within this period

C. The policy will still remain in force if payment is made within this period

D. The policy ceases to have any further coverage if renewal premium is not paid within the days

of grace 15. On revival of a policy, a new contract is said to have come into existence in place of the original one

that had lapsed. Which one of the following statement is FALSE?

A. The incontestability clause may start afresh under the new contract

B. The insurer may impose an extra premium or any other restrictive condition

at the time of revival, if felt necessary

C. A new policy document will be prepared in all cases

D. Suicide clause will begin anew 16. The ABC Insurance Company's policyholder service department has received a request for the

reinstatement of a whole life insurance policy. In order to comply with the request, the policyholder service department probably will check to see that the policyholder has...

I. submitted satisfactory evidence of insurability

II. paid all unpaid premiums in arrears plus interest

III. submitted the request for reinstatement within the specified time after the

lapse of the policy

IV. repaid any outstanding loan against the lapsed policy or agreed to have the loan restored

as a lien against the reinstated policy

A. I, II & IV only


C. All of the above

D. I, II & III only


Chapter 19

1. What is the risk factor of mortality?

I. Sex

II. Social status

III. Avocation

IV. Marital Status

A. I & II only


C. I, II & III only

D. All of the above

2. The insurer usually employs any one of the following methods to deal with sub-standard lives:

I. charge the higher premium

II. debt or lien

III. postpone the premium

IV. postpone the coverage

A. I, II & III only

B. I, II & IV only

C. II & IV only

D. I & IV only

3. In 1999, Encik Ali needs to pay RM2,500 for his EPF, RM1,800 for his anticipated endowment

premium and RM2,000 for house renovation. What is the allowable deduction for that year?

A.

B.

C.

D.

4. Extra risks are classified generally as falling into 3 main groups EXCEPT...

A. increasing extra mortality

B. level extra mortality

C. constant extra mortality

D. decreasing extra mortality

5. The following are major factors affecting mortality EXCEPT...

A. personal habits

B. ethnicity

C. sex

D. wealth


6. Financial underwriting is done by insurance company to uncover...

A. physical hazard

B. fire hazard

C. wealth hazard

D. moral hazard

7. In the transaction of life business, the insurers are on risk...

A. as soon as a letter of acceptance is issued and received by the proposed insured

B. as soon as the completed proposal form is submitted

C. as soon as a letter of acceptance is issued and the first premium is paid

D. as soon as a letter of acceptance is issued and the first premium is paid and accepted

by the insurer

8. An impairment which causes increasing extra mortality is one which, with increasing duration,

becomes more and more a potent factor in affecting longevity. Which of the following is

classified as increasing extra mortality in the underwriting of risks?

A. A construction worker

B. A person who is overweight

C. A person who is engaged in the liquor trade

D. A young person who has suffered from tuberculosis but has been pronounced as cured

9. The tendency of persons with greater likelihood of loss to apply for life insurance is

called...

A. impairment

B. persistency

C. anti-selection

D. physical hazard

10. Normally, the ordinary life insurance policyholder is given 15 days to review the terms and conditions

of the policy. He can return the policy with objections in writing and the insurer will refund the

premium paid in full. This period is called...

A. testing period

B. observing period

C. cooling-off period

D. days of grace period

11. Who bears a great responsibility in the transaction of non-medical business?

A. Agent

B. Life insured

C. Proposer

D. Insurer


12. A life office does not accept automatically all applications for insurance; they will examine all the

elements of risk carefully. This process is called...

A. inspection

B. prospecting

C. selection

D. anti-selection

Chapter 20

1. Participating policies enjoy the right to share in profits of operations of life insurance company in the

form of bonuses. The insured has to pay a slightly higher premium than their non participating. This

additional premium is known as...

A. premium loading

B. bonus loading

C. tax

D. financing cost 2. Installment and true premium is...

A. annual premium

B. periodical premium

C. net premium

D. gross premium

3. If a policyholder is engaged in a hazardous occupation (site worker) at the inception of the policy, and

after 2 years, he changes his occupation to a office job, the insurer normally will consider...

A. reducing the basic premium rate

B. reducing the occupational loading amount

C. allowing the removal of occupational loading

D. maintaining the premium rate with original loading

4. If the health of the insured deteriorates after the policy is effected, the insurer...

A. can ask for extra premium

B. can terminate the policy

C. can allow removal of extra premium

D. cannot ask for extra premium

5. The extra premium for occupational risk will only be imposed or removed when...

A. the proof of age has been submitted

B. the change of occupation has been notified

C. the policy has been in force for more than three years

D. the person's health is good


Chapter 21 1. What are the sources of surplus?

I. Expense

II. Mortality

III. Morbidity

IV. Interest

A. I, II, IV

B. I, II, III

C. II, III, IV

D. All of the above 2. The bonus that is only paid on policies resulting into claims either by maturity or death...

A. cash bonus

B. terminal bonus

C. interim bonus

D. guaranteed bonus 3. There are various ways in which the policyholder's share of surplus is distributed. Which among the

following is NOT TRUE?

A. Simple reversionary bonus

B. Cash bonus

C. Interim bonus

D. Policy loan bonus

4. Assets maybe valued in several ways depending on the purpose of the valuation EXCEPT one:

A. cost price

B. market value

C. interest

D. book value 5. Which among the following is NOT a form of bonus?

A. Interim bonus

B. Maturity bonus

C. Policy loan bonus

D. Compound reversionary bonus

Chapter 22

1. This section introduces the parties to the contract...

A. the heading

B. the proviso

C. the preamble

D. the attestation


2. The insurance company agrees to make payment of the sum stated in the schedule upon the

happening of the insured event. This section is...

A. the heading

B. the condition and privileges

C. the operative clause

D. the preamble

3. Most proposal forms usually seek the following information:

I. personal particulars like age, sex and occupation

II. particulars of other insurance

III. particulars of the proposed insured's hobbies and interest

IV. particulars of the beneficiaries

A. I, II & IV only

B. II & III only

C. III & IV only

D. All of the above

4. The attestation clause in a policy document...

I. confirms the insurer's intention to enter into a contract

II. must be signed by an authorised officer of the insurer

A. I only

B. II only

C. All of the above

D. None of the above 5. The purpose of a proposal form is to...

I. service as evidence in the event of any dispute

II. provide the information for the calculation of the premiums

III. form the basis of the contract between the company and the applicant

A. I & III only

B. II & III only

C. All of the above

D. II only

6. The following are sources of information when the underwriter examines the degree of risk before a

life is insured EXCEPT one:

A. the proposal form

B. medical report

C. letter from employer

D. agent's confidential report


7. Which of the following about a proposal form is CORRECT?

A. A proposal form consists basically of a series of questions drawn up by the insurer,

requesting certain information which will enable them to assess the proposed risk

B. The answers to the questions in a proposal form will discharge the duty upon a prospective

insured to disclose all material information

C. The proposal form is prima facie evidence of the insurance contract

D. The proposal form must be endorsed by the employer of the insured

Chapter 23

1. For a policy effected under section 23 of the Civil Law Act, the money would be paid to the...

A. spouse

B. trustee

C. beneficiary

D. child

2. The following document is acceptable to the insurer as proof of title and ownership:

I. life policy

II. a deed of assignment

III. a probate of will obtained from a court of law

IV. a letter of administration issued by a court of law

A. I, II & III only


C. III & IV only

D. All of the above

3. Claim proceeds that do not exceed can claim without letters of probate

administration.

A. RM 10,000

B. RM 100,000

C. RM 1,000

D. RM 25,000

4. The requirements in settlement of the maturity claims are...

I. proof of age

II. proof of survival

III. discharge voucher completed by the policyholder

IV. the policy document

A. I, II & III only

B. I, III & IV only


D. All of the above


5. A life insurance policy is said to be under a claim when...

A. the insured lapses the policy

B. the insured leaves the country

C. the insured becomes a bankrupt

D. the life insured dies, while the policy is in force 6. The fundamental proofs required for death claims are…

I. proof of death

II. proof of age

III. proof of estate IV. proof of title and ownership

A. I, II & IV only

B. I, III & IV only


D. All of the above

7. In life insurance, there are essentially 3 kinds of claims that can arise. There are...

I. claims against supplementary contract

II. performance claims

III. death claims

IV. maturity claims

A. I, II & III only

B. I, II & IV only

C. I, III & IV only

D. II, III & IV only

8. In maturity claims, the settlement options is / are to...

I. accept the maturity proceeds in cash

II. convert the maturity cash value into a paid-up whole life policy

III. surrender the policy proceeds to the life company

A. I only

B. II only

C. I & II only

D. all of the above

9. When an agent is made aware of an insured's death, the first task is to...

A. notify the insurance company

B. contact the beneficiary

C. make a police report

D. notify the court


10. A policyholder should submit the proof of age as early as possible because...

A. the life company will not recognize any proof of age during death claim

B. it is often easier for the policyholder to produce the necessary proof when he or she is still

alive.

C. any misrepresentation of age will cancel the policy

D. any misrepresentation of age will result into claims not being met

Chapter 24

1. What is the age next birthday, if the life assured was born on March 21, 1965 and the date of the

proposal submitted was January 1, 1998?

A. 31 years old

B. 32 years old

C. 33 years old

D. 30 years old

2. Calculate the outstanding premium charges for the following situation: Sum assured: RM 100,000

Policy Type: Whole Life Half yearly premium: RM 600 Premium payment dates: 1 April & 1 October Last premium paid: 1 October 1993 Application for reinstatement: 1 July 1995

Interest charge: 6% per annum

A. RM 1,880.93

B. RM 1,890.00

C. RM 1,882.36

D. RM 1,908.90

Chapter 25

1. Why is a code of ethics for agents particularly important?

A. To increase commission rate

B. Ethics is an art of selling

C. Agents earn commission

D. Clients rely upon the agent's advice on the right plan to take

2. Peter was previously the agent of company A. Now he is the agent of company B. Recently he

successfully convinced one of his clients to discontinue his policy which was affected with company A

and to take out a fresh policy with company B. This action is termed as...

A. twisting

B. rebating

C. underwriting

D. misrepresentation


3. In the sale of life policies, the agent should...

I. adequately study the prospect's needs and finances before presenting an insurance

plan

II. ensure that the life insurance policy reaches the client safely

III. give advice only on matters which he is competent to deal with

IV. when making comparisons with other types of policies, highlight the different

characteristics of each policy

A. I, II & III only


C. I, III & IV only

D. All of the above

4. Which one of the following about twisting is NOT TRUE?

A. Twisting is strongly prohibited in the insurance industry

B. Twisting is against the code of ethics

C. Twisting is permitted if agreed by the policyholder

D. Twisting is allowed between agents

5. Before a contract of insurance is sold to a consumer, the life insurance agent should undertake the

following EXCEPT one:

A. explain all the essential provisions of the contract, or contracts, which he is recommending so

as to ensure that as far as possible the prospective policyholder understands what he is

committing himself to

B. draw attention to the long-term nature of the policy and to the consequent effects of early

discontinuance and surrender of the policy

C. attempt to persuade a prospective policyholder to cancel any existing policies

D. explain the owner-benefits of the plan and its riders


ANSWER PCE (A+C)

Chapter 1

1. B 2. A 3. C 4. D

5. D 6. B 7. D 8. D

Chapter 2

1.

B

2.

C

3.

B

4.

D

5. D 6. D 7. D 8. B

9. A 10. D 11. A 12. C

13. C 14. C 15. A 16. C

17. C

Chapter 3

1. B 2. A 3. B 4. A

5. A 6. D 7. C 8. A

9. B 10. D 11. A

Chapter 4

1. B 2. C 3. B 4. C

5. A 6. A 7. B 8. C

Chapter 5

1. B 2. D 3. C 4. A

Chapter 6

1.

D

2.

C

3.

B

4.

A

5. A 6. C 7. A 8. A

Chapter 7

1.

D

2.

C

3.

C

4.

D

5. A 6. B 7. C 8. C

Chapter 8

1.

C

2.

C

3.

B

4.

D

5. C 6. D 7. C


Chapter 16

1.

C

2.

D

3.

B

4.

A 5. C 6. C

Chapter 17

1.

B

2.

A

3.

D

4.

C 5. B 6. B 7. C 8. B 9. B 10. C 11. D 12. A

13. B 14. B 15. C 16. C 17. C 18. D 19. C 20. C 21. C 22. A

Chapter 18

1.

B

2.

C

3.

B

4.

D 5. D 6. B 7. C 8. B 9. B 10. B 11. B 12. C 13. B 14. A 15. C 16. C

Chapter 19

1.

D

2.

B

3.

B

4.

C 5. D 6. D 7. C 8. B

9. C 10. C 11. A 12. C

Chapter 20

1.

B

2.

B

3.

C

4.

D 5. B

Chapter 21

1.

A

2.

B

3.

D

4.

C 5. C

Chapter 22

1.

C

2.

C

3.

D

4.

B 5. C 6. C 7. A

Chapter 23

1.

B

2.

D

3.

B

4.

D 5. D 6. A 7. C 8. A

9. A 10. B

Chapter 24

1.

C

2.

C

Chapter 25

1.

D

2.

A

3.

D

4.

D 5. C

Documents

PCE Practice Questions 1