L06 Pricing and Valuation in Life Insurance MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on L06 Pricing and Valuation in Life Insurance, a fundamental topic in the field of IC38 Life Insurance Agent Exam. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our L06 Pricing and Valuation in Life Insurance MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of L06 Pricing and Valuation in Life Insurance mcq questions that explore various aspects of L06 Pricing and Valuation in Life Insurance problems. Each MCQ is crafted to challenge your understanding of L06 Pricing and Valuation in Life Insurance principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC38 Life Insurance Agent Exam tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our L06 Pricing and Valuation in Life Insurance MCQs are your pathway to success in mastering this essential IC38 Life Insurance Agent Exam topic.

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L06 Pricing and Valuation in Life Insurance MCQs | Page 2 of 6

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Q11.
What is the primary difference between rebates for sum assured and rebates for the mode of premium in life insurance?

a.

Sum assured rebates are offered for policies with a specific duration, while mode of premium rebates are not.

b.

Sum assured rebates are offered to encourage regular premium payments, while mode of premium rebates are not.

c.

Sum assured rebates are based on the chosen sum assured amount, while mode of premium rebates are based on the policy duration.

d.

Sum assured rebates are based on the sum assured amount, while mode of premium rebates are based on the frequency of premium payments.

Discuss
Answer: (d).Sum assured rebates are based on the sum assured amount, while mode of premium rebates are based on the frequency of premium payments. Explanation:The primary difference is that sum assured rebates are based on the chosen sum assured amount, while mode of premium rebates are based on the frequency of premium payments.
Q12.
What is the term used to describe individuals in life insurance who are not subject to any significant factors that would pose an extra risk and are charged ordinary rates?

a.

Standard lives

b.

Sub-standard lives

c.

Hazardous lives

d.

Special lives

Discuss
Answer: (a).Standard lives Explanation:Individuals in life insurance who are not subject to any significant risk factors and are charged ordinary rates are known as standard lives.
Q13.
When a person proposing for insurance has health problems that can pose a hazard to their life, they are considered:

a.

Ordinary

b.

Sub-standard

c.

Hazardous

d.

Preferred

Discuss
Answer: (b).Sub-standard Explanation:When a person with health problems that can pose a hazard to their life seeks insurance, they are considered sub-standard.
Q14.
What is the term used for an additional premium imposed by an insurer due to health problems or hazardous occupations?

a.

Health discount

b.

Occupational surcharge

c.

Extra charge or health extra

d.

Ordinary rate

Discuss
Answer: (c).Extra charge or health extra Explanation:An additional premium imposed by an insurer due to health problems or hazardous occupations is often referred to as an extra charge or health extra.
Q15.
What is the purpose of an extra premium in life insurance?

a.

To discourage individuals from seeking insurance coverage

b.

To reduce the overall premium for policyholders

c.

To provide additional benefits to policyholders

d.

To compensate for higher risks associated with certain factors

Discuss
Answer: (d).To compensate for higher risks associated with certain factors Explanation:An extra premium in life insurance is imposed to compensate for higher risks associated with certain factors, such as health problems or hazardous occupations.
Q16.
What are "Double Accident Benefit" (DAB) and "Permanent Disability Benefit" (PDB) examples of in life insurance?

a.

Extra charges for policy administration

b.

Health-related premiums

c.

Extra benefits available on payment of an extra premium

d.

Discounts on the standard premium rates

Discuss
Answer: (c).Extra benefits available on payment of an extra premium Explanation:"Double Accident Benefit" (DAB) and "Permanent Disability Benefit" (PDB) are examples of extra benefits available on payment of an extra premium in life insurance.
Q17.
What is the primary role of an actuary in the process of setting premiums for traditional life insurance policies?

a.

Marketing the insurance policies

b.

Calculating the net premium for each policy

c.

Assessing the health of policyholders

d.

Evaluating the financial stability of the insurance company

Discuss
Answer: (b).Calculating the net premium for each policy Explanation:Actuaries play a key role in calculating the net premium for each traditional life insurance policy.
Q18.
What is "mortality" in the context of life insurance premiums?

a.

The likelihood that a person of a certain age would die during a given year

b.

The expected returns on the policy's investment component

c.

The expenses incurred by the insurance company in managing policies

d.

The additional benefits offered to policyholders

Discuss
Answer: (a).The likelihood that a person of a certain age would die during a given year Explanation:In the context of life insurance premiums, "mortality" refers to the likelihood that a person of a certain age would die during a given year.
Q19.
How is the expected mortality of a person calculated in the context of life insurance premiums?

a.

Using mortality tables

b.

By assessing the policy's cash value

c.

Based on the total sum assured in the policy

d.

By evaluating the policy's reserves

Discuss
Answer: (a).Using mortality tables Explanation:The expected mortality of a person is calculated using mortality tables in the context of life insurance premiums.
Q20.
What does the term "Risk Premium" refer to in life insurance?

a.

The premium charged for high-risk occupations

b.

The extra premium imposed for hazardous hobbies

c.

The cost of insurance based on the likelihood of death

d.

The premium charged for policies with high cash values

Discuss
Answer: (c).The cost of insurance based on the likelihood of death Explanation:"Risk Premium" in life insurance refers to the cost of insurance based on the likelihood of death.
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