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insurance practice exam 2024
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question # 1: Monica was born on April 5th, 1970. She bought $400,000 5-yearrenewable and convertible insurance policy on August 12th 2011, when she was
41 years old. Monica renewed the policy in 2016, and she decided to convert the
policy on June 23rd 2020. Her converted permanent life insurance premiums
were based on her attained age as of her last birthday. Identify Monica’s age
based on which the premiums were calculated after conversion.
a) 50
b) 41
c) 51
d) 46
Rationale: Attained age is the age on which the life insurance premiums are
based. Depending on the administrative policy of the insurance company,
attained age may be considered to be the age of the life insured as of his last
birthday, his next birthday, or his nearest birthday. Depending on the convertible
policy, the premiums for permanent life insurance upon conversion may be based
on the attained age of the life insured at the time of the conversion to the
permanent policy. This is called an attained-age conversion. In this case, Monica’s
permanent life insurance premiums were based on age 50, her attained age on
June 23rd 2020, which is based on her last birthday, which would be April 5th,
2020.
Question # 2:
Lyle works at a large manufacturing company. Like the other full-time employees,
Lyle has life insurance coverage offered by his employer with coverage equal to
three times his salary, up to a limit of $200,000.
Which of the following statements is true?
a) The insurance contract is between the manufacturing company and the
insurance company.
,b) The manufacturing company is the beneficiary of the life insurance coverage on
its employees.
c) As the policyholder, Lyle gets to decide how much insurance he wants.
d) The contract is between the employees and the insurance company.
Rationale:
The master contract of a group life insurance plan is between the policyholder
which in this case is the manufacturing company, and the insurance company.
Lyle is a group plan member but is not a policyholder. However, it is the group
plan member that chooses who will be the beneficiary of his life insurance
coverage, not the policyholder, also referred to as the plan sponsor. (Refer to
Section 6.1)
Question # 3: Aria is a senior VP of a financial institution in Quebec. She has life
insurance through a group plan, which provides her with group coverage of
$700,000. She has additional coverage for $300,000, giving her a total benefit of
$1 million. Yesterday, she handed in her notice. She has decided to start her own
financial services company. While filling out the paperwork with the HR
department, she requests that her group life insurance be converted to individual
insurance. What is the maximum that can be converted?
a) $400,000
b) $200,000
c) $700,000
d) $1,000,000
Rationale: The amount of insurance on a participant’s life that is eligible for
conversion in Quebec must be at least $10,000 and may not exceed $400,000.
Aria can convert $400,000, but must apply for additional individual insurance
separately.
, Question # 4: Georgia is meeting with Phoebe, her insurance agent, to apply for
life insurance. Phoebe has explained the various options to Georgia including
term, whole life, and universal life. Based on Georgia’s needs, Phoebe has
recommended a universal life policy, as it has a number of advantages that will
benefit Georgia. Identify the benefit that applies to universal life policies.
a) UL policies disclose how mortality costs and expenses are applied
b) If Georgia cancels the policy, she will receive the higher of the CSV or the
investment account
c) The premium tax on UL policies only applies to the cost of insurance portion of
the premium
d) The administrative expenses on UL policies are less than whole life policies
Rationale:
UL policies disclose how the mortality costs are applied, how the expense charges
are calculated, and any guaranteed investment returns that apply to the policy.
This gives the policyholder a better understanding of how the cost of insurance
and the expenses vary over time, and how they can impact the cash value of the
policy. The cash value (CV) of a UL policy is the value of the investment account(s)
within the policy.
The premium tax is charged on the entire premium, not just the portion that
covers the cost of insurance.
Because of the complexity and flexibility of UL insurance, the administrative
expenses tend to be higher than for other forms of permanent insurance.
Question # 5: Jamal, aged 61, and his spouse, Francine, aged 60 have three
adopted children under the age of 10. He is the sole income provider for his
family with an average tax rate of 25% and is also eligible for Canada Pension Plan
(CPP) benefits. Francine has chosen to defer collecting her own CPP. He has
approached you to discuss life insurance planning to address any income shortfall
in case he should pass away. Your preferred method for insurance needs analysis
is the capital retention method. Use the following assumptions and facts:
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