Premiums (ID-L)

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Question 1 of 9

1. Question

While gathering information for determining life insurance premiums, the life insurance producer asks questions about the individual’s age, gender, activities, occupation, physical condition, family history, and medical history. This information helps to determine what?

The person's insurable interest

The person's ability to be a field underwriter

The person's mortality

The person's ability to be considered a key person

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Question 2 of 9

2. Question

Insurers use mortality tables to help determine what?

How much an individual’s final expenses will be

What a person’s cause of death will most likely be

How long a person is statistically expected to live

What the policy’s death benefit should be

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Question 3 of 9

3. Question

Of the following, what is the best definition of mortality?

Chance of dying

Chance of being seriously injured

Chance of being able to afford insurance

Chance of wanting to buy insurance

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Question 4 of 9

4. Question

What are the three main factors used to determine life insurance premiums?

Maintainability, assets, estate

Mortality, interest, expenses

Immortality, insurable interest, expenses

Morbidity, indemnity, exclusions

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Question 5 of 9

5. Question

What is the formula to determine the gross annual premium?

Net Single Premium – Expenses (loading) = Gross Annual Premium

Net Single Premium + Expenses (loading) = Gross Annual Premium

Mortality – Interest = Gross Annual Premium

Mortality + Interest = Gross Annual Premium

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Question 6 of 9

6. Question

What is the formula to determine the net single premium?

Mortality – Interest = Net Single Premium

Mortality + Interest = Net Single Premium

Mortality – Expenses = Net Single Premium

Mortality + Expenses = Net Single Premium

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Question 7 of 9

7. Question

Which of the following statements is FALSE about premium frequency?

When an insured pays fewer (but larger) premium payments, there are less administrative costs.

Premium frequency is related to the number of times per year that a policy requires the policyowner to pay the premium.

When an insured pays fewer (but larger) premium payments, the company has the money to invest for a longer period of time.

The more frequent the payments, the less total premium the insurer will charge.

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Question 8 of 9

8. Question

Which of the following statements is NOT true?

Interest is subtracted from the mortality costs.

Expenses are added to the net single premium.

Interest and expenses are part of the formula to calculate the annual premium.

Insurers do not consider their overhead expenses when calculating premiums.

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Question 9 of 9

9. Question

Why is interest subtracted from the mortality costs to equal the net single premium?

Because as a person get's older, the chance of dying usually goes down.

Upon receiving premiums from a customer, insurers immediately invest the money and earn interest.

Men have a lower mortality rate than women.

Because insurable interest is only needed at the time of purchase.

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