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SAMPLE QUESTIONS FOR PCE1. Peril is

A. A loss of properties and livesB. A financial lossC. A cause of lossD. The exposure to danger

2. Trade risk is not insurable because it is aA. Pure riskB. Fundamental riskC. Particular riskD. Speculative risk

3. The functions of insurance include the followingI. Stimulates business enterpriseII. Reduction of lossesIII. Provides employment for manyIV. Sources of capital for investmentA. II & IVB. II, III & IVC. I & IID. I, II, III & IV

4. Insurance isA. A loss sharing arrangementB. A pooling of riskC. An economic institutionD. All the above

5. In insurance, the contributions made by individuals who face the same risk to compensate for their misfortunesagainst financial losses is calledA. RemediesB. PremiumC. AqadD. Takaful

6. To be an effective agent, which of the following should NOT be done?A. To recognize the insuring needs of the clientB. To provide advise to the clientC. Bring financial relief to aggrieved dependents of the insuredD. To ensure the products proposed is beyond the resources of the prospective policyholder

7. The methods of indemnity includeI. Payment by cashII. ReplacementIII. ReinstatementIV. RepairA. I, II & IIIB. I, II & IVC. I, III & IVD. I, II, III & IV

8. For personal accident policies, the most important cause is calledA. Proximate causeB. Mortality causeC. Crucial causeD. Deciding cause

9. Which of the following is one of the risks handling methods?A. Risks manipulationB. Risks protectionC. Risks modificationD. Risks retention

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10. Which of the following describe the definition of risks?A. An uncertainty regarding lossB. A condition that increases the chance of lossC. A reduction of economic valueD. All of the above

11. Which of the following is NOT true about the categories of risk?A. Particular risks are the responsibility of the individuals themselvesB. Pure risks exists when there is the possibility of either loss or no lossC. Investment in the stock market is considered as speculative riskD. Pure risk and speculative risk can easily be handled by insurance technique

12. Risk of property damage from earth quake, flood and typhoon is classified underA. Fundamental riskB. Speculative riskC. Particular riskD. Pure risk

13. Which of the following is NOT true about the criteria of insurable risk?A. Insurance risks must be capable of being financially measuredB. Insurable risks should have the possibility of profits, loss or no lossC. There must be a large number of similar risks involvedD. There must not be a large number of similar risks involved at the same time

14. The essential elements of a contract are offer, acceptance andA. ConsiderationB. Legality of objectC. Capacity to contractD. All of the above

15. The transfers of legal rights and obligations under a life insurance policy to another person is calledA. A conversionB. An endorsementC. A rectificationD. An assignment

16. What is the main statute law governing the life insurance business?A. The Civil Law 1972B. The Insurance Act 1996C. The Insurance Act 1965D. The Companies Act 1983

17. The relationship of principal and agent may be terminated byI. Notice of renunciation given to the principal by the agentII. Notice of revocation given by the principal to the agentIII. Mutual agreementIV. Death, lunacy or bankruptcy of the principal or agentA. I, II and IIIB. II, III and IVC. I, II and IVD. I, II, III and IV

18. Following are among the few stages in the consumer buying decision process, exceptA. Evaluation of alternative policiesB. Pre-purchase evaluationC. Problem recognitionD. Information search

19. Parties must give consideration before an agreement can be legally binding. In general and life contracts, theconsideration to be paid by the insured is termed asA. Cash valueB. Money considerationC. PremiumD. Cash payment

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20. The Takaful Act 1984 is the source of Takaful legislation in Malaysia. The Act is divided into four parts,including the following:I. Provides for interpretation, classification references to takaful businessII. Provides the mode and conduct of takaful businessIII. Provides for the administration and enforcement of matters such as indemnity, submission of annual reports

and statistical returns etc.IV. Specifies powers vested in the Director General of Insurance (DGI)A. I, IIB. I, II & IVC. I, II & IIID. I, II, III & IV

21. A life insurance policy is a legal contract betweenA. The agent and the insurerB. The agent and the insuredC. The insured and the investorD. The agent and the sub-agent

22. The person to whom the rights are transferred is called ___________; while the person who transfers the rights iscalled ___________.A. Assignee; assignorB. Assignor; assigneeC. Transferor; transfereeD. Transferee; transferor

23. Such an authority is deemed to have been exercised by an agent when he/she performs an act which is not withinhis actual authority, but which later becomes binding on the principalA. Express authorityB. Implied authorityC. RatificationD. Apparent authority

24. The basic theory to all insurance is that insurance provides a means of meeting an economic loss byA. Transferring the lossB. Sharing the lossC. Assuming the lossD. Preventing the loss

25. In general insurance (excluding marine insurance), insurable interest must existA. At the time of entering into the contractB. At the time of lossC. At the beginning and at the time of lossD. When marine insurance is involved

26. The principal of indemnity states thatA. The insurer should restore the insured to the same financial position as before the lossB. The insurer should restore the insured to a better financial position as before the lossC. The insurer should restore the insured to a lesser financial position as before the lossD. The insured should enjoy indemnity which is less than his loss as a result of policy limitations

27. Which of the following is NOT true about a claim under the principle of subrogation?A. This type of subrogation is considered as arising out of tortB. In the absence of subrogation, the insured cannot get his claimC. In the presence of subrogation, the insured can either claim from the insurer or the negligent partyD. The principle of subrogation applies to prevent the insured from making profit out of his loss

28. Which of the following is NOT true about the insurance market?A. An insurance market refers to the facilities of buying and selling insuranceB. A propriety company is owned by shareholders and profits earned belong to themC. A co-operative society is owned by shareholders and policyholders which may be termed as a mutual insurerD. The intermediaries in the insurance market are agents and brokers

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29. Assignment of policy can be effected without prior consent of the insurer under the following circumstances exceptA. Marine Cargo PoliciesB. Life policiesC. Transfer of willD. Aviation

30. A life officer does not accept all application for insurance automatically. They examine all risks carefully. Theprocess of examine is callA. Ascertaining standardB. Adverse selectionC. SelectionD. Letter of acceptance

31. Which of the followings is the definition of “Void Contract”?A. The contract will remain valid until the aggrieved party exercise the option to treat it voidB. Contracts which are unenforceable without being voidC. Contracts which are simply one that law held to be no contract at allD. None of the above

32. What do you understand when the organization of a company is said to be decentralized?A. When the preparation of all policies and renewal, etc is carried out in the head officeB. When only the preparation of policies and renewal of the policies are come out in the branches concernedC. When there are no branchesD. When underwriting, claims and servicing of the branch business are handled at the branches up to a

prearranged limit

33. The Malaysia Insurance Institute was formed toA. Promote insurance product of MalaysiaB. Encourage people to buy insuranceC. Promote insurance professionalism and to conduct professional insurance examinationD. A and B above

34. The principle of “utmost good faith” expect the partiesA. To disclosure only those material facts on which there are questionsB. To answer truthfully only the questions in proposal formsC. To disclose only those which they consider materialD. To disclose all material facts of which they are aware of, even if no question is specifically asked

35. In life insurance, the legal consideration for the contract is theA. Payment of renewal premium by the policyholderB. Payment of the initial premium by the applicantC. Release or risk appraisal information by the applicantD. Signing of the application by the proposed insured

36. In the absence of fraud, the statement made by the applicant in the application blanks are considered to beA. Absolute truthB. DisclosureC. WarrantyD. Representation

37. The relationship between the insurer and the agent is normally that ofA. Master and servantB. Buyer and sellerC. Principal and agentD. Employer and employee

38. If no insurable interest existed at the time a policy was taken out, the policy becomesA. Voidable; depending on the judgment of the High CourtB. Void; the company is not obliged to pay a claim under the policyC. Voidable; the company may or may not be obliged to pay a claim under the policy depending on the discretion

of the managementD. Unenforceable; the policy is still recognized by the courts as still subsisting but no claim can be made

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39. The main function of Insurance Mediation Bureau is toA. Provide compensation to victims of motor accidentsB. Provide an alternative procedure to resolve disputes arising out of personal insurance policiesC. Provide insurance coverage at a reasonable cost to certain classes of vehicles as a kind of social serviceD. Manage the Unplaced Motor Pool

40. The Insurance Act of Malaysia 1996, is an example ofA. Equity LawB. Common LawC. Civil LawD. Statute Law

41. A misrepresentation in a life insurance application is considered to be a material misrepresentation whenever theA. Insurer discovers the misrepresentation after the policy’s contestable periodB. Applicant for insurance intentionally makes a misrepresentationC. Representation is not literally true, regardless of its significanceD. Misrepresentation is relevant to the insurer’s acceptance of risk

42. In Malaysia, the majority age isA. 21B. 16C. 18D. 17

43. This involves the selection of segments of the market which have been that can be met by the policies developedby the company this function of the Marketing Department refers toA. Planning and controllingB. Market identificationC. Product developmentD. Selection of distribution channel

44. __________is/are part of the insurance market componentsI. HospitalsII. AgentsIII. Loss adjustersIV. ReinsurersA. II & IIIB. I, II & IIIC. II, III & IVD. I, II, III & IV

45. Insurable Interest should be present in all life insurance contracts. Which one of the following relationships doesnot create insurable interest?A. Husband and wifeB. Creditor and servantC. Master and servantD. Brother and sister

46. When a person applies for insurance on the life of another person, the law requires that the applicant has aninsurable interest in the life of the insured at the time that theA. Benefit is paidB. Policy is surrenderedC. Application is madeD. Insured person dies

47. For life insurance policies, the time when insurable interest needs to exist isA. Before inception of the insuranceB. At the inception of the insuranceC. After the inception of the insuranceD. At the time of claims

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48. The principle of “utmost good fait” means that the parties must discloseA. All material facts of which they are awareB. All material facts of which they ought to be awareC. Only those facts which have been specifically asked for by the companyD. Both a and b

49. The incontestable clause in a life insurance policiesA. Limits the time during which the policyowner has the right to cancel the policyB. Limits the period during which the insurance company can deny claims on the basis of statements made in the

applicationC. Restricts the insurance company as to the time it can take in the payment of legitimate claimsD. Restricts the policyowner as to the time period during which he or she exercise ownership rights

50. A clause which states that no policy after the expiry of two years from the date on which it was effected be calledin question by an insurer on the ground that there is misrepresentation made in the proposal for insurance or in anyother documents which led to the issue of the policy is calledA. Operative clauseB. Two year’s clauseC. Incontestability clauseD. Non-forfeiture clause

51. Minors usually have no capacity to contract, but under the Insurance Act 1963, persons attaining the following ageis allowed to contract for a policyA. 14 yearsB. 16 yearsC. 18 yearsD. 21 years

52. A legal transaction which irrevocably transfers all the ownership rights of a life insurance policy from thepolicyowner to another person is calledA. An absolute assignmentB. A conditional assignmentC. A collateral assignmentD. A complete assignment

53. The document containing the written agreement between the policyowner and the insurer is called theA. ProposalB. Letter of acceptanceC. PolicyD. Application forms

54. A misrepresentation in a life insurance application is considered material if theA. Insurer discovers the misrepresentation after the policy’s contestable periodB. Misrepresentation is not literally true, regardless of its significanceC. Misrepresentation is relevant to the insurer’s arriving at a decision on the acceptance of the riskD. Same is intentional and made with an intent to deceive the insurer

55. A person effecting a life insurance policy on his own life has an insurable interest which isA. UnlimitedB. Limited to his annual incomeC. Dependent on his state of healthD. Dependent on his saving capacity

56. The following statements describe the characteristics of an agency relationship. Which of them is/are true?I. A contract completed by an agent on behalf of the principal is considered to be the contract of the principalII. If it is within an agent’s authority to accept premiums, payment to the agent is deemed as payment made to the

principalIII. The act of an agent within the scope of his or her authority is deemed to be an act of the principalIV. An agent has fiduciary relationship with his principalA. II, III, & IVB. I, II & IVC. I, II & IIID. All the above

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57. It is sometimes said that ‘In insurance, each party to a proposed contract is legally obliged to reveal to the other allinformation which would influence the other person’s decision to enter into the contract, whether such informationis requested or not. This refers to the principle ofA. Caveat EmptorB. Uberrimae fides (Utmost Good Faith)C. Insurable InterestD. Contribution

58. The person normally paying the premiums for the policy and retaining all rights, is called theA. PolicyownerB. BeneficiaryC. Life insuredD. Nominee

59. A contract may be discharged byI. Actual performanceII. Attempted performanceIII. Agreement between the partiesIV. Financial difficultiesA. I & IIIB. I, II & IIIC. I, III & IVD. All the above

60. The relationship of insurer and life agent may be created in the following waysI. By express appointmentII. By implication of lawIII. By subsequent ratification of an unauthorized actIV. Under section 44, Insurance Act 1963A. I & IIB. I, II & IIIC. II, III & IVD. All the above

61. Breach of utmost good faith can occur in the following waysI. By non-disclosureII. By concealmentIII. By innocent misrepresentationIV. By fraudulent misrepresentationA. I, III & IVB. I, II & IVC. II, III & IVD. All of the above

62. Generally, if a person takes out life insurance on another person’s life, an insurable interest must exist on thatperson’s lifeA. At the time of insured’s deathB. On the date the insurance becomes effectiveC. When the premium is collectedD. When the policy is issued

63. The purpose of the insurable interest requirement in life insurance contract is toA. Establish that a genuine risk of loss exists at the time of purchaseB. Ensure that the beneficiary has an insurable interest in the insured at the time of deathC. Reduce the chance that an individual will be over-insuredD. Ensured that the insurance company

64. The term “indemnity” represents which one of the followingA. Promise to payB. InsurabilityC. Insurance for saleD. Insurance risk

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65. A person fails to disclose a material fact willfully, we say he breaches the utmost good faith due toA. Non-disclosureB. Fraudulent misrepresentationC. ConcealmentD. Innocent misrepresentation

66. Which one of the statements below is considered as true about insurable interest?A. Insurable interest should be present throughout the term of the contractB. Insurable interest can only exist between husband and wifeC. A person proposing insurance on another’s life should be so placed as to benefit from the early death of that

other personD. A person proposing another’s life would be so placed as to benefit from the continued existence of that person

or lose by his early death

67. ________ occurs when incorrect information is given about material fact, but the error is unintentionalA. Non-disclosureB. ConcealmentC. Fraudulent misrepresentationD. Innocent non-disclosure

68. The moral and legal contractual duty to disclose all material facts is known asA. Principle of utmost good faithB. Principle of Caveat EmptorC. Breach of contractD. Moral and physical responsibility

69. Any error contained in an application for life insurance becomes the responsibility ofA. The insurerB. The agentC. Either the agent or the proposer depending on the insurer’s decisionD. The proposer

70. The following are classified as breach of “utmost good faith” except oneA. Non-disclosureB. ConcealmentC. Fraudulent misrepresentationD. Innocent non-disclosure

71. An agency can be terminated by the following acts except oneA. Non-disclosureB. ConcealmentC. Fraudulent misrepresentationD. Innocent non-disclosure

72. In contract law, a statement of fact which is made a part of the contract itself and which must be exactly true if thecontract is to be valid is known asA. An affidavitB. An affirmationC. A representationD. A warranty

73. An agent is said to have authority to transact the business of the principal even though the authority is notexpressly granted. Such authority is referred to asA. Collateral authorityB. Absolute authorityC. Apparent authorityD. Implied authority

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74. What is a key-man insuranceA. It is insurance purchased by a firm to protect itself against financial losses caused by the death or disability of

a key employeeB. It is insurance purchased by an important employee in an organization to protect himself against any loss of

employmentC. It is an insurance plan which provides for the payment of annual income to a key employee after retirementD. It is an insurance plan which provides benefits for a large group of key employees

75. In the law of agency, a principal is defined as a person whoA. Is the head of the companyB. Has authorized another person to act on his or her behalf in the creation of contractC. Is given the power to effect contracts with third partiesD. Holds a legal title to properties for the benefits of a third person

76. The principle of “Caveat Emptor” meansA. Protect the sellerB. Let the seller bewareC. Utmost good faithD. Let the buyer beware

77. Pursuant to the Age of Majority Act, 1974, the age of majority isA. 16B. 17C. 18D. 21

78. A legal transaction that transfers only some of a life insurance policy’s ownership rights conditionally to theassignee is calledA. Collateral assignmentB. Absolute assignmentC. Irrevocable assignmentD. Conditional assignment

79. The principle of “utmost good faith” expect the partiesA. To disclose only those material facts on which there are questionsB. To answer truthfully only the questions in the proposal formC. To disclose only those questions which they consider materialD. To disclose all material facts of which they are aware of, even if no question is specially asked

80. An agent is deemed to be an agent of the proposer ifA. He delivers the policy contracts on behalf of the insurerB. He transfers the premium collected to the insurance companyC. He completes an application form on behalf of the proposerD. He advises the proposer on the needs for the life insurance

81. What are the duties of an insurance agent?I. To exercise judgement is selecting clients for the company he representsII. To provide information to the consumer, explaining the features of the coverage provided in the insurance

contractIII. To provide services to client before and after losses have occurredIV. To motivate prospects to take up a life insurance policy by outlining the needs for financial protection for him

and his familyA. I, II & IIIB. I, III & IVC. II, III, IVD. All of the above

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82. The authority of an agent can be classified intoI. Express authorityII. Implied authorityIII. Usual authorityIV. Apparent authorityA. I & IIB. I & IIIC. I, II & IVD. All of the above

83. Generally, the owner of an existing life insurance policy can effectively transfer all policy ownership rights toanother person byA. Naming the person as the revocable beneficiary of the policyB. Allowing the policy to lapse and having it reinstated in the new owner’s nameC. Making an absolute assignment of the policy to the other personD. Naming that person as trustee of the policy

84. Insurance Industry in Malaysia is governed by an Act of Parliament. Name the Act.A. Insurance Ordinance 1963B. Insurance Act 1996C. Road Traffic Ordinance 1963D. Insurance Regulation 1963

85. The tendency of persons with a greater likelihood of loss to apply for life insurance is calledA. ImpairmentB. PersistencyC. Anti-selectionD. Selective purchase

86. All of the followings are true about insurable interest EXCEPTA. A person effecting a life insurance policy must have an insurable interest in the life to be assuredB. Insurable interest must be present at the time the contract is madeC. It is not necessary to prove insurable interest at the time of deathD. Insurable interest means that each party to a contract is legally obliged to reveal to the other all information

which would influence the other’s decision to enter into the contract whether such information is requested ornot

87. Which one of the following is NOT an important consideration in the normal underwriting or selection of risk?A. Physical hazardB. Moral hazardC. Over-insuranceD. Under-insurance

88. If an agent comes across a substandard case during prospecting he shouldA. Disclose his findings to the life companyB. Explain to the prospect that his proposal for life insurance may be rejected or accepted at a higher costC. Encourage his prospect to disclose all facts fully and truthfullyD. All of the above are correct

89. Over-insurance meansA. A person purchased policies from too many companiesB. A person purchased too many policies from one companyC. A person has the capacity to pay the premiums for his policy/policiesD. A person does not have the capacity to pay the premiums for his policy/policies

90. A life insurance agent is granted the authority toA. Accept initial premiumsB. Reword the contract provisions to meet an applicant’s needsC. Approve a medical application’s needsD. Bind the applicant to a contract with an insurance company

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91. In return for an investor’s promise to pay the benefit if an insured should die while a life insurance policy is inforce, the policyowner gives as legal consideration theA. Application onlyB. Application and initial premium onlyC. Initial and renewal premium onlyD. Application, initial and renewal premium only

92. Measurement of the incidence and severity of sickness and accidents which may be expected to occur in apredefined group of persons are known asA. Mortality ratesB. Morbidity ratesC. Survivorship ratesD. Probability rates

93. An agentA. Has the authority to tell a proposed insured that a policy will be issued by the insurance company as requestedB. Has the authority to approve all statements made by the proposed insured on the applicationC. Should verify all statements made by the applicant on the applicationD. Should notify the proposed beneficiaries once the application is made

94. The receipt for the first premium is called theA. Temporary ReceiptB. Conditional ReceiptC. Initial ReceiptD. Provisional Receipt

95. The ‘days of grace’ isA. A period of time after the maturity date during which a policy remains in force without penalty even though

the premium due has not been paidB. A period of time after the premium due date during which a life policy remains in force without penalty even

though the premium due has not been paidC. A period of time on which an insurance policy goes into effect once the initial premium is paidD. A period of time which a policyholder could lodge a complaint with the Director – General of Insurance

96. The companies transacting insurance business in Malaysia can be classified asI. General insurance companiesII. Life insurance companiesIII. Holding companiesIV. Composite companiesA. I & IIB. I, II & IIIC. I, II & IVD. All of the above

97. Life insurance agents are expressly authorized to perform the following actionsI. Approve the application of a proposed insuredII. Solicit life insuranceIII. Accept an initial premium and issue a receipt on behalf of the insurance companyIV. Waived the insurable interest requirementA. II onlyB. II & IIIC. I & IID. All of the above

98. Which of the following are classified as after sales service?I. Policy deliveryII. Reinstatement of policyIII. ClaimsIV. RebatingA. I & IIB. II & IIIC. I, II & IIID. All of the above

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99. In recommending a life insurance contract to a prospective client, the agent should be able to explain completelyI. What policy will do, i.e. the benefits payable in the event of claimII. How much the coverage costs, i.e. the premiumIII. When the coverage goes in force, i.e. the policy date effectiveIV. Anything the policy does not cover, i.e. any exclusionA. I, II & IIIB. I, III & IVC. II, III & IVD. All of the above

100. To discontinue a policy or to have a policy made paid-up and then to effect a new one in another company or thesame company is calledA. TwistingB. RebatingC. UnderwritingD. Prospecting

SAMPLE QUESTIONS FOR PCE SET 1SUGGESTED ANSWERS

1.C 21.C 41.D 61.D 81.D

2.D 22.A 42.C 62.B 82.D

3.D 23.C 43.B 63.A 83.C

4.D 24.B 44.D 64.A 84.B

5.B 25.C 45.D 65.C 85.C

6.D 26.A 46.C 66.D 86.D

7.D 27.B 47.B 67.D 87.D

8.A 28.C 48.D 68.A 88.D

9.D 29.D 49.B 69.D 89.D

10.A 30.C 50.C 70.D 90.A

11.D 31.C 51.B 71.A 91.C

12.A 32.D 52.A 72.C 92.B

13.B 33.C 53.C 73.D 93.C

14.D 34.D 54.C 74.A 94.B

15.D 35.B 55.A 75.B 95.B

16.B 36.D 56.D 76.D 96.C

17.D 37.C 57.B 77.C 97.A

18.B 38.C 58.A 78.D 98.C

19.C 39.B 59.B 79.D 99.D

20.C 40.D 60.D 80.C 100.A

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SAMPLE QUESTIONS FOR PCE SET II1. Mr. Lim lapses his whole life insurance policy after paying premiums for three years and does not elect a

nonforfeiture option. In such case,A. The insurer would automatically send him a cheque for the cash value of the policyB. Mr. Lim loses his right to the nonforfeiture valuesC. An automatic nonforfeiture option specified in the contract would go into effectD. Mr. Lim would receive interest on the cash value until he makes an election

2. Which of the following is a special feature of a reducing term assurance?A. The death benefit fluctuates each yearB. The death benefit is constant throughout the policy year except the lastC. The death benefit decreases each year until there is no amount left at the end of the termD. The cash value of the policy decreases as the net amount at risk decreases

3. Encik Zainal owns a whole life policy which has been in forced for 7 years. The annual premium was due onFebruary 7, 1987. It was subsequently paid on April 6, 1987. The amount Encik Zainal paid wasA. The annual premium due plus interest for the period of February 7 to April 6, 1987B. The annual premium dueC. The annual premium due plus reinstatement feeD. The annual premium due plus interest for the period of March 7 to April 6, 1987

4. What is the advantage of buying a life insurance policy at a younger age?A. Medical examination is totally exempted in all casesB. Non-smoker discount is higher in all casesC. The claim will be paid fasterD. Total premium paid will be less when compared to an older person

5. After the expiration of the “Incontestability” period the insurer can still repudiate the claim under the followingcircumstancesA. When the contract is breachedB. When fraud is provedC. When the insurer was misledD. When concealment of fact is proved

6. The maturity proceeds of a life insurance policyA. Are taxable under Income Tax ActB. Are taxable under Real Property Gains TaxC. Are taxable under Estate Duty EnactmentD. Are not taxable

7. Certain whole life insurance policies are called limited payment policies “Limited payment” refers toA. Number of beneficiaries to whom the proceeds are paidB. Period during which premium are payableC. Manner in which benefit are paidD. Payment of death claims by the insurer is limited by the frequency of the premium paid by the insured

8. The accumulation of excess premium paid in earlier years to support payment of future benefits in later years iscalled theA. Common fundB. ReserveC. Investment fundD. None of the above

9. Joint life insurance can be granted to the followingA. Husband and wife onlyB. Business partners onlyC. Lives of more than one person, each having an insurable interest on the other livesD. None of the above

10. Discount to the premium chargeable to female lives are usually granted becauseA. The income of female is usually smallerB. Females tend to have less sickness than malesC. Females mortality rate is lowerD. Females cannot afford higher premium

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11. In the transaction of life business, the insurer are no riskA. As soon as a letter of acceptance is issuedB. As soon as a letter of acceptance is issued and received by the proposed insuredC. As soon as a letter of acceptance is issued and the first premium is paidD. As soon as a letter of acceptance is issued and the first premium is paid and accepted by the office of the

insurer

12. Mr. Tan purchased a participant life insurance policy. As a direct result of such a purchase Mr. Tan is entitled toA. Owned common stock in the insurance companyB. Share in the insurance company surplus from operationC. Waive insurability requirementD. Request for a higher loan amount from the insurance company

13. The renewal provision in a term life policy usually allows the policyholder to renew the coverage for an additionalperiod of timeA. At an increased premium, provided he is still insurableB. At an increased premium without evidence of insurabilityC. At the same premium, provided he is still insurableD. At the same premium, without evidence of insurability

14. Substandard cases refer toA. Cases in which the premium charged is not standard but charged from time to timeB. Cases in which the applicant pay slightly lower premium than averageC. Cases where insurance is obtainable but for an extra premiumD. Cases when only smaller sums will be insured

15. The risks covered by life insurance which is often referred to as economic deathA. Premature deathB. Permanent disabilityC. Temporary disabilityD. Retirement benefit

16. The long-term nature of the life insurance contract requires the insurer to adopt a cautions view of the belowfactors which enter into the premium rate calculationsI. MortalityII. ExpensesIII. Rate of investment returnsIV. TaxA. I, II & IIIB. I, II & IVC. II, III & IVD. All of the above

17. To have the existence of ____________, the purchase of a life insurance policy must stand to suffer a financial losson the death of the insuredA. Uberrimae fidesB. Insurable interestC. Utmost good faithD. Proximate cause

18. In life insurance, the claim amount is determined at the very beginning of the contract. Such contract is________contract.A. IndemnityB. AleatoryC. SubrogationD. Proximate

19. If the owner of a whole life insurance policy which has been in forced for a long time decides to terminate hiscoverage and stop making premium payments, he will be entitled to theA. Interest earned on the invested portion of the premium paidB. Total amount of premium paidC. The face amount of the policyD. Cash value of the policy, as stated in the contract

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20. The major responsibility of the underwriting department of a life insurance company is toA. Compile mortality tableB. Formulate terms of insurance contractC. Calculate premium rates for different classes of insuredD. Evaluate risk classifications of applicants

21. Premium rates are higher in the early policy years in order to avoid an increase in the premium in the later years.This premium system is known as theA. Natural premium systemB. Modified premium systemC. Level premium systemD. Graded premium system

22. Extra premium paid is removable in respect ofA. Disability extraB. Mortality extraC. Moral extraD. Non of the above

23. The clause that normally appears at the end of the first page of the policy and signed by an authorized person of theinsurance company is calledA. Proviso clauseB. Operative clauseC. Contract clauseD. Attestation clause

24. The main objective under a Children’s Deferred policy isA. To provide for the school education of the childB. To provide for the medical expenses of the childC. To provide for the future life insurance needs of the childD. To provide for the funeral expenses in case of early death of the child

25. What is convertible term insurance?A. These are term insurance where there is an option for renewal of policiesB. These are term insurance giving an option to convert to whole life or endowment insurance during the term of

the policy without further medical examinationC. These are term insurance where medical examination is neededD. These are term insurance which can be converted to group policies

26. A policy which shares in the company’s divisible surplus is calledA. Permanent policyB. Participating policyC. Non-participating policyD. Temporary policy

27. These are certain disadvantages in twisting a life policy. Stated below are some of the disadvantages faced by theclient EXCEPT one:A. Suicide clause begins anewB. Incontestable clause begins anewC. The accumulation of cash value begins anewD. The agent earns more commission

28. When a suicide clause is included in a life policy, it is usual for life officers to pay one of the following when theinsured commits suicide within the exclusion periodA. The face amountB. The face amount less 1 year premiumC. The return of premiums only with interestD. The return of premiums only

29. A life insurance claim is not payable ifA. There is a misstatement of the insured’s ageB. There is a material misrepresentation in the application formC. The beneficiary cannot produce letters of administration for the deceased’s estateD. The insured dies before the maturity date of the policy

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30. Under whole life policies, it is usual for cash value to be only available afterA. 1 yearB. 2 yearsC. 3 yearsD. 5 years

31. The “burden of proof” for claims made under a life policy in a suicide case is laid upon theA. CourtB. ClaimantC. DoctorD. Insurer

32. Jerry Foong made a proposal for a policy on his own life and received a letter of acceptance stating that the policywould be issued on payment of the premium, but before the insurer issued the policy document. Jerry Foong diedin a car accident. The insurer had to pay the claimantA. The premium that had been receivedB. The sum assuredC. The surrender valueD. Nothing

33. In life insurance, the term “supplementary contract” generally refers to a separate contract made at the time ofA. Claim settlementB. Policy issueC. Policy assignmentD. Application

34. Life insurance is the most practical means of meeting one’s financial obligations arising from an individual’spremature death because ___________A. It creates an immediate estateB. It always provides the most moneyC. It is more accessible than savings or stocksD. It earns the greatest interest

35. One difference between individual life insurance and group life insurance is that a person who is insured under agroup life policy is not permitted toA. Convert the policyB. Select the amount of coverage he and she will haveC. Change the beneficiary after the policy is in forceD. Name any beneficiary he or she wishes

36. In life insurance, the word “loading” generally refer to theA. Cash value of the policyB. Extra premium charged for special riders or benefitsC. Amount which is added to net premiums to provide for the insurance company’s expenses and possible

fluctuations in claims or interest ratesD. Extra interest amount which is earned by the insurance company

37. The characteristic of a paid-up policy are:I. The sum assured is reduced and payable under the same circumstances as the original policyII. No more premiums need to be paidIII. The bonuses already declared remain attached and the policy usually becomes non-participatingIV. The policyholders would need to furnish proof of insurability to the insurance companyA. I & IIB. I, II & IIIC. II, III & IVD. All of the above

38. In the underwriting of life insurance policies, which of the following factors will influence the assessment of risk?I. The proposer’s physical conditionII. The proposer’s medical historyIII. The proposer’s family medical historyIV. The proposer’s occupation

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A. I, II & IIIB. I, II & IVC. II, III & IVD. All of the above

39. The major differences between a whole life policy and an endowment policy areI. Whole life premiums are generallyII. Endowment policies are of shorter durationIII. Cash value take a longer time to build up a whole life planIV. Endowments are for savings onlyA. I & IIB. I & IIIC. II & IIID. II & IV

40. Age of the life assured is an important factor in determiningI. Whether an insurance policy can be granted to a personII. The type of evidence of health requiredIII. Whether a policy loan can be grantedIV. The rate of premium to be chargeA. I, II & IIIB. I, II & IVC. II, III & IVD. All of the above

41. The purpose of underwriting is generallyI. To ensure that the standard of longevity of the persons insured compares favorably with those indicated in the

mortality table usedII. To increase the volume of business securedIII. To maintain equity amongst the policyholders in regard to the rate of premium charged in conformity with the

degree of risk presentedIV. To avoid anti-selectionA. I, II & IIIB. I, III & IVC. II, III & IVD. All the above

42. Choose the correct combination of the following statementsI. No loan can be advanced during the first year of the policy durationII. Loans can be granted under a temporary insuranceIII. Surrender value should always be less than the loan valueIV. A loan taken against a policy need not be repaidA. I & IIB. I & IIIC. I & IVD. III & IV

43. Which of the following are TRUE about the over statement of age?I. The policy will become null and void due to the breach of utmost good faithII. The beneficiary of the insured is entitled to the face amount of the policy, plus a refund of the excess premium

paidIII. Policy proceeds will be adjusted in accordance with the provision of the Insurance Act 1996A. I & IIB. I & IIIC. II & IIID. Non of the above

44. The applicant for life insurance policy usually has a choice with respect to some of the provisions and privilegesthat will be included in the policy he or she will receive. Typically, the applicant has a choice as toI. Whom the policy proceeds are to be paidII. How the dividend, if any, are to be used or appliedIII. How frequently premiums are to be paidIV. Whether a reinstatement privilege is to be included

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A. I & IIIB. II, III & IVC. I, II & IIID. All of the above

45. Which of the following are features of a Children’s Deferred Assurance policy?I. It does not cover any death risk on the child’s life before the child reaches the vesting ageII. Medical examination of the parent effecting the insurance is necessary in all casesIII. It is effected by a parent on the life of a child with the intention that the policy should vest in the child on his

attaining a specified ageA. II & IIIB. I & IIIC. I & IID. All of the above

46. The following are true about the characteristics of a life insurance contractI. It is a contract of utmost good faithII. It is an unilateral contractIII. It is an executory contractA. I & IIB. I & IIIC. II & IIID. All of the above

47. Which of the following are non-forfeiture provisions?I. Surrender cash valueII. Paid-up insuranceIII. Automatic premium loanIV. Reinstatement pf policyA. I, II & IIIB. II, III & IVC. I, II & IIID. All of the above

48. Normally, life insurance companies gives discount for the followingI. Substandard riskII. Non-smokerIII. Large sum assuredIV. Better-than-average riskA. I & IIIB. II & IIIC. I & IVD. All of the above

49. Which of the following are taken into account in the calculation of tabular premiums?I. ExpensesII. Rate of survivalIII. Rate of interestIV. Rate of mortalityA. I, II & IIIB. II, III & IVC. I, III & IVD. All of the above

50. Under the following, which policy is suitable for persons with small income for the present but with goodprospects for the development of a successful career?A. Renewable Term InsuranceB. Decreasing Term InsuranceC. Ordinary Life PolicyD. Anticipated Endowment Insurance

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51. Which of the following is NOT true about different types of life policies?A. There is no “forced saving” element in term insuranceB. Upon conversion of a term insurance, the premium rate for the converted policy is based on the original age or

the attained age of the Life AssuredC. Annuities are mainly bought by older people, seeking to convert capital, e.g. from gratuity fund, into an

income for life.D. None of the above

52. Permanent Health Insurance provides such benefit asA. Income during periods of sickness or disabilityB. A lump sum payment on the diagnosis of any specified diseases which affects health of life assuredC. A lump sum payment on any sickness incurred on the life assuredD. Income equal to the insured’s earnings during periods of sickness or disability

53. Which of the following is true about personal accident benefit?A. Bodily injury does not include nervous shock, bruising or organic injuryB. Internal injury caused by external means is sufficient to give rise to a valid claimC. Accident caused by suicide, self-injury, drugs and alcoholism will only be eligible to 50% of the sum payableD. Air travel is excluded in the personal accident cover

54. The joint life policyA. Can be issued under whole life, endowment and term policiesB. Only pays out when all the lives of business partnersC. Can be issued on the lives of business partnersD. Continues following the first policy proceeds on the death of the joint lives

55. Part of the Takaful installment made by participants and credited by the company into the Participant’s Account(PA) is forA. Savings and tabarukB. Savings and investmentsC. Investments and risk fundD. Investments and tabaruk

56. The advantage of the waiver of premium under a Children’s Deferred Policy is thatA. Premiums are waived upon the death of the parentB. Premiums are waived when the child reaches vesting ageC. Premiums are waived upon the death of the parent and are payable againD. Premiums are waived if the child dies before reaching vesting age

57. The premiums charged for the following policies are entitled to tax relief exceptA. Life policyB. Endowment policyC. Term policyD. Personal accident policy

58. The document containing the written agreement between the policyowner and the insurer is called theA. Proposal formB. Letter of acceptanceC. PolicyD. Fully completed application form

59. In Malaysia, the system of premium payment normally used isA. One lump sum payment systemB. Natural payment systemC. Level payment systemD. Standard payment system

60. Under the following, which is the most difficult factor to be assessed by the underwriter as for risk assessmentpurposes?A. Condition of healthB. Physical hazardC. Moral hazardD. Occupation hazard

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61. Mr. Chan bought a life insurance policy; he is still alive when the policy matured. The payment that he will bereceiving is defined asA. Death claimsB. Alive claimsC. Maturity claimsD. Bonus claims

62. Generally, a policyholder has the right to make a beneficiary designationA. Only on the date when the premium is dueB. Only at the time as the application is submittedC. Only the policy anniversary date onlyD. At any time while the person whose life is insured is still living

63. Before any claim payment is made during maturity claim, which one must be produced?A. The policy documentB. Income Tax statementC. Estate duty certificateD. Doctor’s medical statement

64. The section of the policy where the date of proposal, name and address of the assured, premium amount and age ofthe life assured are found is known asA. ProvisoB. ScheduleC. HeadingD. Preamble

65. The provision which states that the policy shall not lapse for non-payment after it has acquired a cash value, andthat the policy will be converted to a free policy is calledA. Automatic extended term insuranceB. Automatic paid-up clauseC. Automatic premium loanD. Renewal option

66. The surrender value isA. The cash paid to policyholders who surrender their policies after 3 yearsB. Guaranteed for all policiesC. Determined arbitrarily by the insurerD. Not similar to the cash vale

67. Mr. Wong owns a whole life insurance policy which has been in forced for a long time. If he decides to determinehis coverage and stops making premium payments, he will be entitled to theA. Face value of the policyB. Cash value of the policyC. Total amount of premium paidD. Interest earned on the invested portion of the premium paid

68. For children’s insurance, the main deference between a Protected Educational Policies and Children’s DeferredAssurance isA. For Protected Educational Policies, the policy is issued on the life of the parent; for Children’s Deferred

Assurance, the policy is issued on the life of the childB. For Protected Educational Policies, the policy is issued on the life of the child; for Children’s Deferred

Assurance, the policy is issued on the life of the parentC. For Children’s Deferred Assurance, if the parent’s death occurs during the term, the premium cease to be

payableD. For Protected Educational Policies, the premiums are expected to be paid throughout the term, even if the

parent happens to die before the policy vests in the child

69. Simon died as the result of illness five years after a whole life policy on his life was issued. It was then discoveredthat his age has been overstated by four years on the insurance application. In this case, the beneficiary of thepolicy would receiveA. An amount equal to the total of the premium Simon paidB. No paymentC. The face amount of the policy plus the amount of over-payment of premiumD. The cash value of the policy only

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70. In the event of death of the assured after the date of maturity of a policy, but before receiving the policy proceeds,the claim should be treated asA. Maturity claimB. Death claimC. Fraudulent claimD. Bonus claim

71. A lapsed policy is one for which theA. Policyowner has failed to make the premium payment during the policy periodB. Premium has not been made during the last 30 days of the policy periodC. Policyowner has failed to make the premium payment within the grace periodD. Policyowner has failed to meet all of the legal requirements as set forth by the Insurance Act, 1996

72. After a policy has been allowed to lapse, the insured is given an opportunity to renew it if certain conditions aremet. The opportunity to renew a lapsed policy is called theA. Reinstatement provisionB. Incontestable provisionC. Lapsation provisionD. Amendment provision

73. For life insurance policy, a creditor having an insurable interest in his debtor’s life can effect a valid insurance onthe life of the debtor concerned. The maximum sum assured isA. 1/3 of the debtB. 2/3 of the debtC. The total debt amountD. No limit

74. Which of the following are features of a reduced paid-up policy?I. Sum Assured decreasesII. No need to pay anymore premiumIII. New riders can be addedIV. Cannot change beneficiaryA. I & IIIB. I & IIC. I, III & IVD. All the above

75. The age of the person to be insured is usually stated in the proposal form. This is important for the followingreasons:I. To determine the rate of premiums to be chargedII. To ascertain if the insurance can be granted to the applicant. If so, the appropriate amount to be providedIII. To determine whether medical evidence is required. If it is required, the type of medical evidenceIV. To determine whether policy loans could be advanced to the life assuredA. I & IIB. I & IIIC. I, II & IIID. All of the above

76. Information relating to the date of birth, occupation and type of policy plan applied for is generally obtained fromA. The Agent’s ReportB. The EmployerC. The Medical Declaration formD. The proposal Form

77. When a policy is cancelled prematurely, it will meanA. A gain to the insurerB. A loss to the insurer and the policyholderC. A gain to the policyholderD. A gain to the agent

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78. When the policy has become lapsed, the agent should suggestA. Reinstatement of the lapsed policyB. Discontinuance of the policyC. Purchasing a new policyD. Refund of full premium paid

For questions 79 and 80, please refer to the following information(i) Date of birth of life insured: 1st October 1957(ii) Date of commencement of policy – 1st June 1985

79. Calculate the age nearest birthday of the life assured at the time when the policy starts to commence?A. 27B. 28C. 29D. 26

80. What is the age-next-birthday of the life assured at the commencement date of the policy?A. 26B. 27C. 29D. 28

81. If the date of birth of a person falls on December 1, 1941,and he purchased a life insurance policy on July 1, 1984.What is his age at the next birthday?A. 43B. 33C. 45D. 44

82. The requirements for proof of age may differ from one company to another. However, there are certain commonproofs which may ordinarily be accepted by the life office. These areI. Birth CertificateII. Photocopies of identity cardIII. PassportIV. School certificateA. I & IIIB. I, II & IIIC. I, III & IVD. All of the above

83. The most important service which an agent and the company is expected to provide is to help in the promptsettlement of claims. Some of the claims that can arise from the life insurance contracts and the attached riders areI. Accident claimsII. Hospitalization claimsIII. Death claimsIV. Maturity claimsA. I & IIIB. I, II & IVC. II, III & IVD. All of the above

84. The duration of the grace period of a life insurance policy is determined by theA. Amount of premium paidB. Type of policy planC. Frequency of the premium paymentD. Value of the sum assured

85. Once a policy has lapsed, the insured usually can reinstate the policy providedA. Proof of insurability is shown, all back premiums due plus interest have been paidB. Proof of insurability is shown, all back premiums due have been repaidC. Proof of insurability is shown, all back premiums due plus loan taken have been repaidD. Proof of insurability is shown, all back premiums due, loan taken plus interest have been repaid

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86. The following are true about the misrepresentation of age, except oneA. Age is understatedB. The sum assured would be adjusted corresponding to the true ageC. Age is overstatedD. The excess premiums would not be refunded

87. The surrender value isA. The cash paid to policyholders who surrender their policies after 3 yearsB. Guaranteed for all policiesC. Determined arbitrarily by the insurerD. Not similar to the cash value

88. It is condition and privilege that a life policy will not lapse if the renewal premium is paid withinI. 15 days of the premium due date in the case of monthly premiumII. 30 days of the premium due date in the case of all other modes of paymentsA. IB. IIC. I & IID. None of the above

89. Lapsation can be caused by the following, except one:-A. Over-insuranceB. MisrepresentationC. TwistingD. Under-insurance

90. In maturity claims, the settlement options are toI. Accept the maturity proceeds in cashII. Convert the maturity cash value into a paid-up whole life policyIII. Surrender the policy proceeds to the life companyA. IB. IIC. I & IID. All the above

91. If a new mode of payment calls for less frequent payments, the total annual premium paid by the Policyowner willA. IncreaseB. DecreaseC. Remain the sameD. Vary

92. Which one of the following is true?A. A policy will acquire cash value after 2 yearsB. A policy will acquire cash value after 6 yearsC. A policy with cash value will lapse after the grace periodD. A policy without a cash value will lapse after the grace period

93. Mr. Chan died during the grace period of his life insurance policy without having paid the premium due. Thebeneficiary of his policy is entitled to receiveA. Only a return of the premiums paid on the policyB. The full policy benefitC. The policy benefit, minus the unpaid premiumD. Nothing

94. Mr. Goh had joined the Malaysian Air Force 3 weeks before he purchased a RM20,000 10-year non-participatingEndowment policy on his life. The policy contained an “exclusion of war” clause. After two years, while on leavefrom active duty, Mr. Goh was killed in an aeroplane accident on his way to Singapore. In this situation, Mr.Goh’s beneficiary isA. Not entitled to any paymentB. Entitled to the face amount of the policyC. Entitled only to an amount equal to the premium paidD. Entitled to return of premiums with interest thereon at market rate

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95. The incontestability clause in life insurance policyA. Limits the time during which the Policyowner has the right to cancel the policyB. Limits the period during which the insurance company can delay claims on the basis of statements made in the

applicationC. Restrict the insurance company as to the time it can take in the payment of legitimate claimsD. Changes the term under the contract

96. After the policy has been allowed to lapse, the insured is given an opportunity to renew it if certain conditions aremet. The opportunity to renew a lapsed policy is called theA. Reinstatement provisionB. Incontestable provisionC. Lapsation provisionD. Non-forfeiture provision

97. The three essential requirements for settlement of death claims areI. Proof of deathII. Proof of ageIII. Proof of estateIV. Proof of title and ownership at deathA. I, III & IVB. II, III & IVC. I, II & IVD. All of the above

98. A policyholder should submit acceptable documentary evidence as proof of age, as early as possible becauseA. The life company will not recognize any proof of age during the processing of a death claimB. It is often easier for the policyholder to produce the necessary proof when he or she is still aliveC. Any misrepresentation of age will result in cancellation of the policyD. The insurer will refuse to release the agent’s commission until satisfactory proof of age is submitted

99. Some of the causes of lapsation areI. The policyholder purchased the policy due to high pressure sales by the agent instead of being convinced of

the need for insuranceII. The type of policy selected was not the best suited to the needs of the policyholderIII. The policyholder was not given full and complete information about the contractIV. Wrong or misleading information is given by a competing agentA. I, II & IIIB. II, III & IVC. I, III & IVD. All the above

100. The beneficiary of the insurance policy which has an outstanding policy loan at the death of the insured willreceive from the insurance companyA. Only an amount equal to the premium paidB. The cash surrender value of the policy minus the amount of the outstanding loanC. The full death benefitD. The death benefit minus the amount of the outstanding loan

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SAMPLE QUESTIONS FOR PCE SET IISUGGESTED ANSWERS

1.C 21.C 41.B 61.C 81.A

2.C 22.D 42.C 62.D 82.D

3.A 23.D 43.C 63.A 83.D

4.D 24.C 44.C 64.B 84.C

5.B 25.B 45.B 65.A 85.A

6.D 26.B 46.D 66.A 86.D

7.B 27.D 47.A 67.B 87.A

8.B 28.D 48.B 68.A 88.C

9.C 29.B 49.C 69.C 89.D

10.C 30.C 50.A 70.A 90.C

11.D 31.B 51.D 71.C 91.B

12.B 32.B 52.A 72.A 92.D

13.B 33.D 53.B 73.C 93.C

14.C 34.A 54.C 74.B 94.B

15.B 35.B 55.B 75.C 95.B

16.D 36.C 56.C 76.D 96.A

17.B 37.B 57.D 77.B 97.C

18.B 38.D 58.C 78.A 98.B

19.D 39.A 59.C 79.B 99.D

20.D 40.B 60.C 80.D 100.D