Test Preparation Guide for LOMA 280 9781579743529

Citation preview

Test Preparation Guide for LOMA 280

ONLINE COURSE PORTAL This text is assigned reading material for LOMA 280—Principles of Insurance. Enrollment in this course includes access to the LOMA 280 Course Portal, which provides, in addition to all assigned study materials, an array of study tools, including some online and multimedia features to enhance your learning experience and help you prepare for the examination.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

LOMA (Life Office Management Association, Inc.) is an international association founded in 1924. LOMA is committed to a business partnership with its worldwide members in the insurance and financial services industry to improve their management and operations through quality employee development, research, information sharing, and related products and services. Among LOMA’s activities is the sponsorship of several self-study education programs leading to professional designations. These programs include the Fellow, Life Management Institute (FLMI) program and the Fellow, Financial Services Institute (FFSI) program. For more information on all of LOMA’s education programs, please visit www.loma.org.

Statement of Purpose: LOMA Educational Programs Testing and Designations Examinations described in the LOMA Education and Training Catalog are designed solely to measure whether students have successfully completed the relevant assigned curriculum, and the attainment of any LOMA designation indicates only that all examinations in the given curriculum have been successfully completed. In no way shall a student’s completion of a given LOMA course or attainment of a LOMA designation be construed to mean that LOMA in any way certifies that student’s competence, training, or ability to perform any given task. LOMA’s examinations are to be used solely for general educational purposes, and no other use of the examinations or programs is authorized or intended by LOMA. Furthermore, it is in no way the intention of the LOMA Curriculum and Examinations staff to describe the standard of appropriate conduct in any field of the insurance and financial services industry, and LOMA expressly repudiates any attempt to so use the curriculum and examinations. Any such assessment of student competence or industry standards of conduct should instead be based on independent professional inquiry and the advice of competent professional counsel.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Test Preparation Guide for LOMA 280

Information in this text may have been changed or updated since its publication date. For current updates, visit www.loma.org.

LOMA Education and Training Atlanta, Georgia Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

PROJECT TEAM: Authors:

Sean Schaeffer Gilley, FLMI, ACS, AIAA, AIRC, FLHC, AAPA, ARA, CEBS, HIA, MHP, PAHM Melanie R. Green, FLMI, ACS, AIAA Martha Parker, FLMI, ACS, ALHC, AIAA

Project Manager:

Julia K. Wooley, FLMI, ACS, ALHC, HIA, MHP

Technical Support:

David A. Lewis, FLMI, ACS

Learning Coordinator:

Tonya Vaughan

Administrative Support:

Mamunah Carter

Copyright © 2011 LL Global, Inc. All rights reserved. 19 18 17 16 15 14 13 12 11

10 9 8 7 6 5 4 3 2 1

This text, or any part thereof, may not be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, storage in an information retrieval system, or otherwise, without the prior written permission of the publisher. While a great deal of care has been taken to provide accurate, current, and authoritative information in regard to the subject matter covered in this book, the ideas, suggestions, general principles, conclusions, and any other information presented here are for general educational purposes only. This text is sold with the understanding that it is neither designed nor intended to provide the reader with legal, accounting, investment, marketing, or any other types of professional business management advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

ISBN: 978-1-57974-352-9 Printed in the United States

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Contents Contents ................................................................................................................................................ 5 Preface................................................................................................................................................... Preface ................................................................................................................................................... 6 Practice Questions................................................................................................................................ Questions................................................................................................................................ 8 Chapter One ....................................................................................................................................... 9 Chapter Two..................................................................................................................................... Two ..................................................................................................................................... 12 Chapter Three................................................................................................................................... Three................................................................................................................................... 15 Chapter Fou Four .................................................................................................................................... 17 Chapter Five..................................................................................................................................... Five ..................................................................................................................................... 20 Chapter Six....................................................................................................................................... 22 Chapter Seven .................................................................................................................................. 25 Chapter Eight ................................................................................................................................... 28 Chapter Nine .................................................................................................................................... 33 Chapter Ten ...................................................................................................................................... 38 Chapter Eleven................................................................................................................................. Eleven ................................................................................................................................. 42 Chapter Twelve ................................................................................................................................ 45 Chapter Thirteen .............................................................................................................................. 48 Chapter Fourteen.............................................................................................................................. Fourteen.............................................................................................................................. 52 Answers to Practice Questions.......................................................................................................... Questions .......................................................................................................... 55 Sample Examination.......................................................................................................................... Examination .......................................................................................................................... 57 Answers to Sample Exam .................................................................................................................. 74

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

6 | Test Preparation Guide for LOMA 280

Preface Before You Begin… Important Information on How to Study and Prepare for a LOMA Examination Welcome to the Test Preparation Guide (TPG) for LOMA 280. This learning package was designed by LOMA to complement Principles of Insurance by Harriett E. Jones, J.D., FLMI, AIRC, ACS, and Steven R. Silver, J.D., FLMI, AFSI, ACS, AIRC, AAPA. Used along with the textbook, this TPG will help you master the course material as you prepare for the LOMA 280 examination. This TPG includes practice questions and a full-scale sample examination. The nature of LOMA’s self-study program offers two important benefits. First, you have the opportunity to learn important job-related information that will help you become a more knowledgeable and valuable employee. Second, a self-study program allows you to learn at your own pace and study at times that suit your own schedule. You may need some help in developing the skills necessary for self study, or you may have some qualms about taking examinations. Even if you’re very confident of your study skills, you need to understand what you will be expected to know once you have completed the course and how you can make sure you have mastered the course content. That’s why LOMA developed the TPG. LOMA provides valuable tips on effective studying and test taking strategies. “Study Tips” and “Becoming Test-Wise” include many practical pointers that will help you organize your study and prepare for the examination for this course. Both of these tools can be found in the Exam Prep section of the Course Portal. The remainder of the TPG is your guide to mastering the course material. By reading and working through this manual, you not only will discover how to focus your study, but you will also receive valuable practice in applying your knowledge and will be able to gauge your level of mastery of the material. The TPG is your key to learning success.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Preface | 7

Acknowledgments The TPG for LOMA 280 was designed to provide a comprehensive, self-directed learning approach to help students master the information in this course. As with all projects at LOMA, development of the TPG depended upon the combined efforts of many individuals. Our thanks go to Julia K. Wooley, FLMI, ACS, ALHC, HIA, MHP, who acted as Project Manager. Thanks also go to Tonya Vaughan for her work typesetting this text, and to Amy Stailey for her cover design. Sean Schaeffer Gilley, FLMI, ACS, AIAA, AIRC, FLHC, AAPA, ARA, CEBS, HIA, MHP, PAHM Melanie R. Green, FLMI, ACS, AIAA Martha Parker, FLMI, ACS, ALHC, AIAA Atlanta, Georgia 2011

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

8 | Test Preparation Guide for LOMA 280

Practice Questions

Learning objectives are now presented with the Practice Questions. The learning objectives in the assigned text are each measured by one or more practice questions. Each practice question represents an example of how your knowledge of the learning objective may be measured on the examination for this course. Learning objectives appear in a shaded box above the question or questions associated with that learning objective. Additional information on how to use learning objectives to guide your study and preparation for the exam appears in “Study Tips,” which can be accessed in the Course Portal under Exam Prep. An interactive version of these Practice Questions can be accessed in the Course Portal under Exam Prep.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 1 Practice Questions | 9

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter One

Learning Objective: Distinguish between speculative risk and pure risk.

1.

Both individuals and businesses experience two kinds of risk—speculative risk and pure risk. By definition, a pure risk is one in which the possible outcomes include (1) (2) (3) (4)

loss, no loss, or gain only loss or no loss only loss only gain

Learning Objective: Describe various ways to manage financial risk.

2.

Individuals and businesses often use risk management as a means of identifying and assessing financial risks. To eliminate or reduce exposure to a specific financial risk, an individual can use at least one of four risk management techniques: avoid the risk, control the risk, transfer the risk, or accept the risk. From the answer choices below, select the response that correctly describes an individual controlling the risk of financial loss. (1) Lauren Knill insists that all passengers riding in her automobile wear seat belts at all times. (2) Colton Grey, a self-employed graphic design artist, purchased a disability income insurance policy that will provide him with monthly income benefits if he becomes totally disabled. (3) Because he is concerned about suffering neck and back injuries, Franklin Mulongo never rides roller coasters at amusement parks. (4) After purchasing a new computer, Lisa Huggins rejected the manufacturer’s offer of an extended warranty on the new computer system. Learning Objective: Identify the five characteristics of insurable risks.

3.

In order for a risk—a potential loss—to be considered insurable, the risk must have certain characteristics. The following statements are about various risks. Select the answer choice that correctly represents a characteristic of insurable risk. (1) In order to provide insurance coverage to an individual, an insurer must be able to predict the losses that the proposed insured will experience. (2) In order for a potential loss to be insurable, the element of chance must be present. (3) Only those potential losses that would cause catastrophic financial damage to both the insurer and the insured are considered to be insurable. (4) For most types of insurance, an insurable loss must be definite in terms of the amount of the loss, but not in terms of when to pay the benefits.

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

10 | Test Preparation Guide for LOMA 280

4.

Every insurance policy can be classified as a valued contract or a contract of indemnity. Nancy Upchurch is the policyowner-insured of a life insurance policy and a medical expense insurance policy. Ms. Upchurch’s life insurance policy can be classified as a (contract of indemnity / valued contract). Her medical expense insurance policy can be classified as a (contract of indemnity / valued contract). (1) (2) (3) (4)

5.

contract of indemnity / contract of indemnity contract of indemnity / valued contract valued contract / contract of indemnity valued contract / valued contract

The law of large numbers states that, typically, the more times we observe a particular event, the (more / less) likely that our observed results will approximate the true probability—or likelihood—that the event will occur. Using this concept, insurers have been able to develop (mortality tables / morbidity tables) that indicate with great accuracy the number of people in a large group who are likely to die at each age. (1) (2) (3) (4)

more / mortality tables more / morbidity tables less / mortality tables less / morbidity tables

Learning Objective: Define antiselection and give examples of two factors that can increase or decrease the likelihood that an individual will suffer a loss.

6.

From an insurer’s standpoint, the tendency of individuals who believe they have a greater-thanaverage likelihood of loss to seek insurance protection to a greater extent than do other individuals is known, by definition, as (1) (2) (3) (4)

reinsurance speculative risk antiselection moral hazard

Learning Objective: Identify four risk classes for proposed insureds.

7.

Insurance companies generally classify proposed insureds who have a significantly greater-thanaverage likelihood of loss but who are still found to be insurable in a risk category known as (1) (2) (3) (4)

declined risks preferred risks standard risks substandard risks

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 1 Practice Questions | 11

Learning Objective: Define insurable interest and determine in a given situation whether the insurable interest requirement is met.

8.

Doris Crowell applied for a life insurance policy on her own life and named her next-door neighbor, Patrick O’Neill, as the beneficiary of the policy even though they are not related and have no relationship other than as neighbors. At the same time, Mr. O’Neill applied for a life insurance policy on the life of Ms. Crowell and named himself as the beneficiary. According to insurable interest laws, an insurable interest most likely exists in (1) (2) (3) (4)

both of these applications Ms. Crowell’s application, but not in Mr. O’Neill’s application Mr. O’Neill’s application, but not in Ms. Crowell’s application neither of these applications

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

12 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Two

Learning Objective: Distinguish among the three types of business organizations and explain why insurance companies must be organized as corporations.

1.

In most countries, insurance companies and most other businesses are organized as corporations. One difference between a corporation and other forms of business organization is that (1) (2) (3) (4)

a corporation is less stable and less permanent than other forms of business organization a corporation’s assets and liabilities belong to the corporation itself, not to its owners a corporation’s structure protects it from being sued only a corporation dissolves if a majority owner dies

Learning Objective: Distinguish among stock insurers, mutual insurers, and fraternal benefit societies.

2.

The Benchmark Association is a nonprofit organization formed to provide social, as well as insurance, benefits to its members. Members in the association share a common vocational background. Benchmark’s members elect officers and are members of local chapters, usually referred to as lodges, which hold regular meetings. Only lodge members and their families are permitted to own Benchmark insurance. Benchmark is best classified as a type of organization known as a (1) (2) (3) (4)

fraternal benefit society property/casualty (P&C) insurance company partnership depository institution

Learning Objective: Describe the financial services industry and explain how insurance companies function within that industry.

3.

The following statements are about financial institutions. Three of the statements are true, and one of the statements is false. Select the answer choice containing the FALSE statement. (1) Insurance companies cannot be classified as financial institutions because they do not function in the economy as financial intermediaries. (2) Financial institutions serve as financial intermediaries by channeling funds from groups that act as suppliers of funds to groups that act as users of funds. (3) Financial institutions help people, businesses, and governments save, borrow, invest, and otherwise manage money. (4) A financial institution is a business that owns primarily financial assets, such as stocks and bonds, rather than fixed assets, such as equipment and raw materials.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 2 Practice Questions | 13

4.

Consider the following consolidations in the financial services industry: Oak Financial Services and the Pine Bank recently consolidated to form one financial services corporation. After the consolidation, Pine Bank survived as a legal entity, and Oak Financial Services ceased to exist. Emerald Financial Services purchased a controlling interest in Diamond Insurance. After this consolidation, both Emerald Financial Services and Diamond Insurance survived as separate legal entities. From the answer choices below, select the response that correctly indicates whether each consolidation transaction is a merger or an acquisition. (1) (2) (3) (4)

Oak and Pine transaction acquisition acquisition merger merger

Emerald and Diamond transaction acquisition merger acquisition merger

Learning Objective: Describe the roles that the federal and state governments play in U.S. insurance regulation.

5.

In the United States, the McCarran-Ferguson Act affects the regulation of the insurance industry. The primary effect of the McCarran-Ferguson Act is that it (1) ensures uniformity in insurance regulation among the states (2) prohibits insurers from engaging in a variety of practices that are considered unfair or deceptive (3) leaves insurance regulation to the federal government, as long as the states consider federal regulation to be adequate (4) leaves insurance regulation to the state governments, as long as Congress considers state regulation to be adequate

6.

In the United States, the National Association of Insurance Commissioners (NAIC) develops model laws and regulations. One characteristic of the NAIC and the model laws and regulations it develops is that the (1) (2) (3) (4)

NAIC is a governmental association created by the U.S. federal government function of the NAIC is to promote uniformity of state insurance regulation states are required to adopt the NAIC’s model laws and regulations as written states may modify model laws and regulations, but they must adopt some form of each model law and regulation

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

14 | Test Preparation Guide for LOMA 280

Learning Objective: Identify the two primary types of insurance regulation in most countries.

7.

Owners’ equity is the difference between the amount of a company’s assets and the amount of its liabilities, and it represents the owners’ financial interest in the company. Owners’ equity in a mutual insurance company consists of (1) (2) (3) (4)

both capital and surplus capital, but not surplus surplus, but not capital neither capital nor surplus

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 3 Practice Questions | 15

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Three

Learning Objectives: (1) Explain the difference between a valid contract, a void contract, and a voidable contract; and (2) Identify the four general requirements for the creation of a valid informal contract and describe how each of these requirements can be met in the formation of an insurance contract.

1.

Robert Houck purchased a life insurance policy on his life from Classic Financial. Mr. Houck purchased the policy after a court had declared him to be mentally incompetent. In this situation, the contract for insurance is (1) (2) (3) (4)

void valid and binding on Classic voidable only by Mr. Houck voidable by either Classic or Mr. Houck

Learning Objective: Distinguish between formal and informal contracts, bilateral and unilateral contracts, commutative and aleatory contracts, and contracts of adhesion and bargaining contracts, and identify the types of contracts an insurance contract represents.

2.

A life insurance contract is enforceable because the parties to the contract met requirements concerning the substance of the agreement rather than requirements concerning the form of the agreement. In addition, the insurer’s promise to pay the policy benefit is contingent on the death of the insured occurring while the policy is in force. This information indicates that a life insurance contract is (1) (2) (3) (4)

an informal, commutative contract an informal, aleatory contract a formal, commutative contract a formal, aleatory contract

Learning Objective: Identify the four general requirements for the creation of a valid informal contract and describe how each of these requirements can be met in the formation of an insurance contract.

3.

The following statements are about the general requirements that must be met for a valid life insurance contract to be formed. Select the answer choice containing the correct statement. (1) Only an insurer must express its intent to be bound by the terms of an insurance contract in order to fulfill the requirement of mutual assent. (2) An applicant gives the application and the initial premium and promises to pay the renewal premiums as consideration for a life insurance contract. (3) In order for an insurance contract to be valid, each party to the contract must give or promise something that is of value to the other party. (4) The requirement of lawful purpose in the making of an insurance contract is fulfilled by the presence of an offer and the acceptance of that offer.

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

16 | Test Preparation Guide for LOMA 280

4.

The following statements are about contractual capacity in the formation of contracts. Select the answer choice containing the correct statement. (1) If an insurer issues a policy to a person who is younger than the permissible age to purchase insurance, the insurer can sue to avoid the policy. (2) An insurer acquires its legal capacity to issue an insurance contract by being licensed or authorized to do business as an insurer by the proper regulatory authority. (3) To establish a valid contract in most jurisdictions, an individual must first prove his legal capacity in a court of law. (4) Corporations are generally presumed to have the same contractual capacity as that of a minor. Learning Objective: Distinguish between formal and informal contracts, bilateral and unilateral contracts, commutative and aleatory contracts, and contracts of adhesion and bargaining contracts, and identify the types of contracts an insurance contract represents.

5.

Different types of contracts have certain characteristics. In a life insurance contract, only the insurer makes a legally enforceable promise when entering into the contract. This characteristic of an insurance contract identifies it as a (1) (2) (3) (4)

bilateral contract bargaining contract contract of adhesion unilateral contract

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 4 Practice Questions | 17

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Four

Learning Objective: Describe the legal reserve system, and explain how a product’s financial design allows a life insurance company to meet its policy reserve requirements.

1.

In the insurance industry, policy reserves represent the amount an insurer estimates it will need for the purpose of (1) (2) (3) (4)

2.

accumulating surplus funds reinsuring risks for direct writers paying future benefits to policyowners paying stockholder dividends to the owners of its stock

For this question, if answer choices (1) through (3) are all correct, select answer choice (4). Otherwise, select the one correct answer choice. The system insurance companies use to set financial values for life insurance policies is generally known as the legal reserve system. The premise(s) on which this system is based include (1) that the amount of benefits payable should be specified or calculable in advance of the insured event (2) that companies should collect in advance the money needed to fund a policy reserve so that the insurer will have sufficient funds available to pay claims and expenses as they occur (3) that the amounts a customer pays for a life insurance policy should be related to the amount of risk the insurance company assumes for that policy (4) all of the above Learning Objective: Identify and define the three primary elements in the financial design of a life insurance product, and explain how each element affects a product’s financial design.

3.

For an insurance product, the cost of benefits is the value of all benefits under the product. The cost of benefits for a single life insurance product can be calculated by (1) adding a charge for operating expenses to each year’s potential benefit payable minus expected investment earnings (2) subtracting all the potential benefits payable from the total premiums the company expects to receive (3) multiplying all the potential benefits payable by the expected probability that each potential benefit will be payable (4) dividing all the potential benefits payable by the expected probability that each potential benefit will be payable

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

18 | Test Preparation Guide for LOMA 280

Learning Objectives: (1) Identify and define the three primary elements in the financial design of a life insurance product, and explain how each element affects a product’s financial design, and (2) Explain how insurers use mortality tables in the financial design of products, and describe the effect that mortality rates have on the cost of benefits and the premium rate for a block of policies.

4.

The following statements are about the mortality rates that are shown in mortality tables. Select the answer choice containing the correct statement. (1) In general, the higher the mortality rate for a group of insureds of the same age and sex, the lower the premium rate. (2) Mortality rates for males typically are lower than the mortality rates for females of the same age. (3) A mortality table that shows separate mortality rates for smokers and nonsmokers is referred to as a composite mortality table. (4) A mortality experience table is a mortality table that reflects the actual mortality of an insurance company’s insureds. Learning Objective: Describe the effect of compound interest on investment earnings, and calculate the amount of interest earned on a given sum of money.

5.

Dan Ruggiero loaned $1,000 to his sister, Ronda Houseman. Mr. Ruggiero charged his sister a 10 percent interest rate, compounded annually. At the end of two years, Ms. Houseman wanted to pay back the entire loan plus the total interest accrued on the loan. This information indicates that Ms. Houseman should pay Mr. Ruggiero a total of (1) (2) (3) (4)

$1,000 $1,020 $1,200 $1,210

Learning Objective: Identify and define the three primary elements in the financial design of a life insurance product, and explain how each element affects a product’s financial design.

6.

The operating expenses in an insurance product design are the expenses that arise in the normal course of the insurer’s operations. An insurer’s operating expenses include all of the following costs EXCEPT (1) (2) (3) (4)

taxes payroll office expenses benefit payments

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 4 Practice Questions | 19

Learning Objective: Explain the purpose of using conservative values in the financial design of a life insurance product.

7.

Using conservative values in financial design provides to insurers a risk margin against adverse developments. Conservative values for specific life insurance product elements generally take the form of (1) (2) (3) (4)

mortality rates that are higher than expected investment earnings that are higher than expected operating expenses that are lower than expected profits that are higher than expected

Learning Objective: Define premium rate, and calculate the annual premium amount for a given life insurance policy.

8.

The annual premium rate for a $500,000 life insurance policy is expressed as $4 per $1,000 of coverage. The annual premium amount for this policy is (1) (2) (3) (4)

$20 $200 $2,000 $20,000

Learning Objective: Explain how the level premium system operates.

9.

In the level premium system of financial design, the premium rates charged for level premium policies (1) (2) (3) (4)

increase as an insured’s age increases decrease as an insured’s age increases are higher than needed to pay claims and expenses in earlier policy years are lower than needed to pay claims and expenses in earlier policy years

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

20 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Five

Learning Objective: Identify the common personal and business needs that life insurance can meet.

1.

Colleen Moore is the policyowner-insured of a life insurance policy that names her 32-year-old son, David, as the beneficiary. If Ms. Moore dies while the policy is in force and while David is still alive, then the death benefit of the policy will be payable to (1) Ms. Moore’s estate, and the death benefit, if paid in a lump sum, most likely will be considered taxable income to the estate (2) Ms. Moore’s estate, and the death benefit, if paid in a lump sum, most likely will not be considered taxable income to the estate (3) David, and the death benefit, if paid in a lump sum, most likely will be considered taxable income to David (4) David, and the death benefit, if paid in a lump sum, most likely will not be considered taxable income to David

2.

George Remick developed a plan that considers the amount of assets and debts that he is likely to have at the time of his death. The plan also considers how Mr. Remick can best preserve those assets so that they can be distributed as he desires. The plan Mr. Remick developed is known, by definition, as (1) (2) (3) (4)

a key person insurance plan an estate plan a business continuation insurance plan a buy-sell agreement

Learning Objective: Describe the coverage provided by level term, decreasing term, and increasing term life insurance policies, and explain when the premium charged for term life insurance coverage may increase.

3.

Harris Anderson purchased a new home and obtained a 30-year mortgage from the HomeSweetHome Mortgage Company. The terms of the mortgage loan contract required Mr. Anderson to purchase mortgage life insurance and to name HomeSweetHome as the beneficiary of the mortgage life insurance policy. Mr. Anderson purchased mortgage life insurance from the Beachside Insurance Company. The following statements are about this situation. Select the answer choice containing the correct statement. (1) HomeSweetHome Mortgage Company is a party to the mortgage life insurance contract that Mr. Anderson purchased. (2) Beachside Insurance is a party to the mortgage loan contract that Mr. Anderson obtained. (3) The amount of the renewal premium Mr. Anderson will pay for his mortgage life insurance policy is likely to decrease throughout the 30-year term of his mortgage loan. (4) The amount of the policy benefit payable at any given time under Mr. Anderson’s mortgage life insurance policy generally equals the amount Mr. Anderson owes on the mortgage loan.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 5 Practice Questions | 21

4.

The following statements are about family income coverage and credit life insurance. Select the answer choice containing the correct statement. (1) Family income coverage is a plan of increasing term life insurance. (2) Family income coverage provides a stated monthly income benefit amount to the beneficiary—typically the insured’s surviving spouse—if the insured dies during the term of coverage. (3) The amount of benefit payable under a credit life insurance policy usually remains level over the duration of the loan. (4) The policy benefit of a credit life insurance policy may be paid to a beneficiary other than the lender, or creditor, if the insured borrower dies during the policy’s term. Learning Objective: Describe renewable term life insurance and convertible term life insurance.

5.

Ana Maria Avila purchased a $100,000 15-year renewable term insurance policy on her life. At the end of the 15-year term, the renewal provision in Ms. Avila’s policy most likely gives her the right, within specified limits, to renew her insurance coverage (1) (2) (3) (4)

6.

without having to submit evidence of her insurability for a one-year term, but not for another 15-year term after first undergoing a required medical examination at the same premium rate she was charged for the original 15-year term policy

Edgar Whitefeather is the policyowner-insured of a five-year term life insurance policy for which the face amount remains the same throughout the term of the insurance coverage. One feature of Mr. Whitefeather’s policy gives him the right to change the term policy to a cash value life insurance policy without providing evidence that he continues to be an insurable risk. This information indicates that Mr. Whitefeather’s insurance policy can be characterized as (1) (2) (3) (4)

a renewable term insurance policy an increasing term insurance policy a decreasing term insurance policy a convertible term insurance policy

Learning Objective: Describe the operation of a return of premium (ROP) term policy.

7.

Kaitlin Miller, age 35, purchased a $250,000 30-year return of premium (ROP) term insurance policy from the Kumquat Insurance Company. Ms. Miller paid annual premiums of $700. Ms. Miller paid all required premiums and was alive at the end of the 30-year term when the policy expired. This information indicates that (1) (2) (3) (4)

Ms. Miller’s policy expired without Kumquat making any payment to anyone Kumquat paid $21,000 to Ms. Miller Kumquat paid $250,000 to the beneficiary of Ms. Miller’s policy Kumquat paid $250,000 to Ms. Miller

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

22 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Six

Learning Objective: Define cash value life insurance and distinguish it from term life insurance.

1.

Whole life insurance products and term life insurance products differ as to whether they contain a savings element, and whether they offer insurance coverage for the entire lifetime of the insured or for only a certain period of time. (Term / Whole) life insurance builds a cash value that functions as a savings element. (Term / Whole) life insurance provides protection for the entire lifetime of the insured, as long as the policy remains in force. (1) (2) (3) (4)

Term / Term Term / Whole Whole / Term Whole / Whole

Learning Objective: Identify the common characteristics of whole life insurance, modified whole life insurance, and joint whole life insurance, and describe the features that differentiate these types of whole life insurance.

2.

The following statements are about two types of whole life insurance policies: limited-payment policies and continuous-premium policies. Select the answer choice containing the correct statement. (1) The annual premium for a limited-payment whole life insurance policy is greater than the annual premium for an equivalent continuous-premium whole life insurance policy. (2) The cash value of a continuous-premium whole life insurance policy builds more rapidly than does the cash value under an equivalent limited-payment whole life insurance policy. (3) Under a limited-payment whole life insurance policy, life insurance coverage expires at the end of the specified premium payment period. (4) A continuous-premium whole life insurance policy is considered to be paid up when the insured reaches age 65.

3.

Some insurers issue modified-premium whole life insurance policies. According to the terms of most modified-premium policies, the amount of the annual premium changes after a specified initial time period. Compared to a continuous-premium whole life insurance policy with the same face amount, a modified-premium whole life insurance policy has an initial annual premium that is normally (1) (2) (3) (4)

lower, and a cash value that builds more quickly lower, and a cash value that builds more slowly higher, and a cash value that builds more quickly higher, and a cash value that builds more slowly

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 6 Practice Questions | 23

4.

Sang-jin Kwon, age 42, pays level premiums for a type of whole life insurance policy. The policy specifies that the face amount will decrease from $300,000 to $200,000 when Mr. Kwon reaches age 60, and then decrease again from $200,000 to $100,000 when he reaches age 70. From the answer choices below, select the response that correctly identifies the type of policy Mr. Kwon purchased, and whether the annual premium Mr. Kwon pays for this policy is higher or lower than the annual premium he would pay for a continuous-premium whole life insurance policy that provided $300,000 of coverage throughout his lifetime. (1) (2) (3) (4)

5.

Type of policy modified-premium policy modified-premium policy modified coverage policy modified coverage policy

Annual premium rate lower than for a continuous-premium policy higher than for a continuous-premium policy lower than for a continuous-premium policy higher than for a continuous-premium policy

Doug Cooper purchased a whole life insurance policy that insures both him and his wife, Jennifer, and provides funds to pay any estate taxes that may be levied after their deaths. The policy specifies that the death benefit will be paid only after both Doug and Jennifer have died. This information indicates that the type of insurance policy Doug purchased is (1) (2) (3) (4)

an endowment insurance policy a last survivor life insurance policy a joint whole life insurance policy a family policy

Learning Objective: Explain how universal life insurance differs from whole life insurance in terms of its separate policy elements and its flexible premiums, face amount, and death benefit.

6.

One true statement about a universal life insurance policy is that the (1) policy is treated as a life insurance product under United States federal tax laws, regardless of the size of the policy’s cash value in relation to its death benefit (2) policyowner decides, within certain limits, what the policy’s face amount will be, the amount of the death benefit payable, and the amount of premiums he will pay for that coverage (3) policyowner may not use the cash value of the policy as security for a policy loan (4) policy elements, such as mortality charges, interest rate, and expenses, are combined into one bundle and stated in the policy as a single periodic premium amount that the policyowner must pay to keep the policy in force

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

24 | Test Preparation Guide for LOMA 280

Learning Objective: Describe how variable life insurance allows policyowners to decide how their premiums and cash values are invested.

7.

The following statements are about variable life (VL) insurance in the United States. Select the answer choice containing the correct statement. (1) A VL insurance policy’s premiums and cash values are invested in an investment account, which the insurer maintains separately from its general investment account. (2) The death benefit provided by a VL insurance policy remains constant throughout the life of the policy. (3) VL insurance policies offer policyowners guaranteed investment earnings and minimum cash values. (4) The insurance company alone assumes the investment risk of a VL insurance policy. Learning Objective: Describe the features that variable universal life insurance products share with universal life insurance and variable life insurance products.

8.

Margaret Reece purchased a variable universal life (VUL) insurance policy from the Patrician Life Insurance Company. Ms. Reece’s policy combines features of universal life insurance and variable life insurance. One characteristic of Ms. Reece’s VUL insurance policy is that the (1) (2) (3) (4)

policy elements are not listed separately premiums are fixed face amount is flexible policy has a flexible interest rate with a guaranteed minimum

Learning Objective: Describe the characteristics of endowment insurance.

9.

The difference between an endowment insurance policy and a cash value life insurance policy is that only the endowment insurance policy (1) pays a fixed benefit whether the insured survives to the policy’s maturity date or dies before that maturity date (2) has premiums that are level throughout the term of the policy (3) steadily builds a cash value (4) receives favorable federal income tax treatment in the United States

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 7 Practice Questions | 25

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Seven

Learning Objective: Identify and describe three types of supplemental disability benefits that life insurance policies may provide.

1.

Rusty Shackleford is the policyowner-insured of a whole life insurance policy issued by the Mountainview Life Insurance Company. Mr. Shackleford was injured in an accident and was unable to work for 18 months. After Mr. Shackleford satisfied a three-month waiting period, Mountainview began paying the renewal premiums on Mr. Shackleford’s policy, and the policy’s cash value continued to increase just as if Mr. Shackleford were paying the premiums himself. This information indicates that Mr. Shackleford’s policy contained a (1) (2) (3) (4)

2.

waiver of premium for payor benefit waiver of premium for disability (WP) benefit paid-up additions option benefit disability income benefit

One benefit that may be added to an individual life insurance policy is the disability income benefit. One true statement about a supplemental disability income benefit is that (1) the insured must be totally disabled to receive the benefit (2) the insurer begins paying benefits at the start of the disability (3) life insurance policies that include a disability income benefit rarely include a waiver of premium for disability (WP) benefit as well (4) the amount of the monthly disability income benefit is a percentage of the insured’s current earnings Learning Objective: Explain the coverage that an accidental death benefit rider provides and give examples of common exclusions.

3.

Rachel Loo, age 29, died when the commercial airplane on which she was traveling as a passenger crashed, killing everyone on board. At the time of her death, Ms. Loo was insured by a $300,000 whole life insurance policy with a typical double indemnity accidental death benefit rider. This information indicates that the insurer is liable for paying the designated beneficiary of Ms. Loo’s policy (1) (2) (3) (4)

$0 $300,000 $600,000 $900,000

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

26 | Test Preparation Guide for LOMA 280

4.

One type of supplemental accident benefit is the accidental death and dismemberment (AD&D) benefit. AD&D benefits generally specify that the (1) insured must be totally disabled and unable to work in order to receive any benefits (2) insurer will pay both accidental death benefits and dismemberment benefits for injuries suffered in the same accident (3) insured must suffer the actual physical loss of a limb to qualify for dismemberment benefits (4) dismemberment benefit is payable if an accident causes the insured to lose any two limbs or sight in both eyes Learning Objective: Identify three types of accelerated death benefit riders and describe the differences among those riders.

5.

Accelerated death benefits, also known as living benefits, allow a policyowner-insured to receive all or part of the policy’s death benefit before the insured’s death if certain conditions are met. Three commonly offered types of accelerated death benefits are the terminal illness (TI) benefit, the dread disease (DD) benefit, and the long-term care (LTC) insurance benefit. The following statements are about these different types of accelerated death benefits. Select the answer choice containing the correct statement. (1) Insurers generally offer accelerated death benefit coverage on policies of all face amounts. (2) Insurers typically charge an additional premium amount for all three types of accelerated death benefits. (3) The payment of an accelerated death benefit reduces the death benefit that will be paid to the beneficiary at the insured’s death by the amount of the accelerated death benefit paid. (4) Insurers pay only lump-sum benefits under all three types of accelerated death benefits. Learning Objective: Describe three types of insurance riders that expand a life insurance policy’s coverage to insure more than one individual.

6.

Sally Warner, the policyowner-insured of a whole life insurance policy, wants to add a second insured rider to the policy so that her business partner, Patricia Skelton, will be provided with life insurance coverage. The insurer most likely will base the premium rate for the coverage provided by the rider on (1) (2) (3) (4)

the combined risk characteristics of Ms. Warner and Ms. Skelton the risk characteristics of Ms. Warner only the risk characteristics of Ms. Skelton only a flat amount that the company charges for all second insured riders

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 7 Practice Questions | 27

Learning Objective: Identify two types of insurability benefit riders and explain how they allow a life insurance policyowner to purchase additional insurance coverage.

7.

Scott Herbermann is the policyowner-insured of a $200,000 whole life insurance policy. The policy includes a supplemental benefit rider that gives Mr. Herbermann the right to purchase $25,000 of additional whole life insurance at age 34, age 37, and age 40, without submitting evidence of insurability. This information indicates that Mr. Herbermann’s policy includes the type of supplemental benefit known as (1) (2) (3) (4)

an additional insured rider a paid-up additions option benefit a guaranteed insurability (GI) benefit credit life insurance

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

28 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Eight

Learning Objective: Describe the free-look provision of an insurance policy.

1.

Ginger Harrison applied for an individual $250,000 insurance policy on her life and paid the initial premium. The insurer issued the policy as applied for, and the insurer’s agent delivered the policy to Ms. Harrison on June 15. The policy included a typical 10-day free-look period. Ms. Harrison was killed in an automobile accident on June 22. She never indicated whether she intended to keep the policy or return it to the insurer. In this situation, the named beneficiary is entitled to receive (1) $250,000, because Ms. Harrison’s coverage was in effect during the 10-day freelook period (2) a return of the initial premium only, because Ms. Harrison had not advised the insurer of her decision to keep or return the policy (3) a return of the initial premium only, because Ms. Harrison’s death occurred during the 10day free-look period (4) nothing, because Ms. Harrison’s coverage would not have gone into effect until after the expiration of the 10-day free-look period Learning Objective: Identify the documents that make up the entire contract between the owner of a life insurance policy and the insurer.

2.

The wording of the entire contract provision in a life insurance policy varies according to whether the policy is a closed contract or an open contract. The following statements are about these two types of contracts. Select the answer choice containing the correct statement. (1) The entire contract provision in a closed contract typically states that the entire insurance contract consists of the policy, any attached riders, and the attached copy of the application for insurance. (2) Because insurance policies issued by fraternal insurers are closed contracts, the insurer must attach a copy of the fraternal society’s charter, constitution, and bylaws to the policy in order for the contract to be valid. (3) All individual life insurance policies are open contracts. (4) The entire contract provision in an open contract allows oral statements to modify the terms of the policy.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 8 Practice Questions | 29

Learning Objective: Explain the purpose and operation of the incontestability provision.

3.

Each of the situations below describes a misrepresentation made in the application for an individual life insurance policy. The insurer discovered the misrepresentations after receiving death claims on the policies. In each case, the insurance policy contains a typical two-year incontestability provision: Claire Bodin stated on her application for insurance that she had broken her right wrist in a jogging accident, when in fact, she had broken her left wrist. Ms. Bodin died during her policy’s contestable period. Miriam Kauffman stated on her application for insurance that she had been treated for a chest cold when, in fact, she had been treated for cancer. Ms. Kauffman died of cancer three years after the policy was issued. Clayton Stuckey stated on his application for insurance that he had received a routine medical check-up on February 26, when in fact, the visit was a post-operative visit following heart bypass surgery. Mr. Stuckey died 18 months after the policy was issued. With regard to these situations, it most likely is correct to say that the insurer has the right to avoid the contract on the ground of a material misrepresentation in the application(s) submitted by (1) (2) (3) (4)

Ms. Bodin, Ms. Kauffman, and Mr. Stuckey Ms. Bodin only Ms. Kauffman only Mr. Stuckey only

Learning Objective: Apply the terms of the standard grace period provision in a given situation to determine whether a life insurance policy has lapsed for nonpayment of premium.

4.

Creighton Madden was the policyowner-insured of a $100,000 term life insurance policy that contained a typical grace period provision. The policy’s annual premium of $500 was due on September 1 of each year. Mr. Madden died on September 14, 2010, without having paid the renewal premium due on September 1, 2010. At the time of his death, Mr. Madden had paid a total of $10,000 in premiums to the insurer. In this situation, the amount the insurer most likely paid Mr. Madden’s designated beneficiary was (1) (2) (3) (4)

$0 $10,000 $99,500 $100,000

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

30 | Test Preparation Guide for LOMA 280

Learning Objective: Identify situations in which a life insurance policy can be reinstated and the conditions the policyowner must meet to reinstate the policy.

5.

Antonio Castellano was the policyowner-insured of a traditional whole life insurance policy that lapsed two years ago. Mr. Castellano now wishes to reinstate the lapsed policy. At the time his policy lapsed, there were no outstanding policy loans. If the reinstatement provision in his policy is typical, then the conditions Mr. Castellano must meet in order to reinstate his policy include (1) completing a reinstatement application within the time frame stated in the reinstatement provision and presenting satisfactory evidence of his continued insurability only (2) completing a reinstatement application within the time frame stated in the reinstatement provision and paying all back premiums plus interest on those premiums only (3) presenting satisfactory evidence of his continued insurability and paying all back premiums plus interest on those premiums only (4) completing a reinstatement application within the time frame stated in the reinstatement provision, providing satisfactory evidence of his continued insurability, and paying all back premiums plus interest on those premiums Learning Objective: Determine the action an insurer likely will take if it discovers a misstatement of the age or sex of the person insured by a life insurance policy.

6.

Tom Espeland applied to the Mosaic Insurance Company for an insurance policy on the life of his mother, Joanna. He incorrectly stated on the application that Joanna was age 50, when in fact, she was 53 years old. The policy contained a typical misstatement of age provision. Mosaic discovered the misstatement of age when processing a claim for the policy’s death benefits. In this situation, Mosaic most likely will (1) pay the policy’s face amount based on the age stated in the insurance application (2) reduce the policy’s face amount to the amount that the premiums paid would have purchased had Joanna’s age been stated correctly on the insurance application (3) give the policy beneficiary the option to receive as a refund any premium amount difference caused by the misstatement rather than adjust the policy’s face amount (4) declare the policy void because Joanna’s age was misrepresented on the insurance application

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 8 Practice Questions | 31

Learning Objective: Describe the rights provided by a policy loan provision and a policy withdrawal provision, and explain the differences between a policy loan and a commercial loan.

7.

Cash value life insurance policies typically grant the policyowner the right to borrow money from the insurer by using the cash value of the policy as security for the loan. The following statements are about the characteristics of such policy loans. Select the answer choice containing the correct statement. (1) Insurers typically do not permit policyowners to take out policy loans on universal life insurance policies. (2) A policy loan is an advance payment of part of the amount that the insurer eventually must pay out under the life insurance policy. (3) A policy loan creates a debtor-creditor relationship between the policyowner and the insurer. (4) A policyowner has the right to take out a policy loan for any amount up to the policy’s face amount. Learning Objective: Identify and describe the nonforfeiture options typically included in cash value life insurance policies.

8.

The following statements are about the nonforfeiture options available to policyowners of life insurance policies that build cash values. Select the answer choice containing the correct statement. (1) Coverage issued under the reduced paid-up insurance nonforfeiture option does not have a cash value. (2) Once a policyowner selects the extended term insurance nonforfeiture option, the policyowner loses the right to cancel the extended term insurance and surrender the policy for its remaining cash value. (3) Under the cash payment nonforfeiture option, when a policyowner surrenders a policy, the insurer may subtract the amount of any outstanding policy loan, plus any interest on the loan, from the cash surrender value amount listed in the policy. (4) Under the reduced paid-up nonforfeiture option, any supplemental benefits that were available on the original policy, such as accidental death benefits, are usually available when the policy is continued as reduced paid-up insurance.

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

32 | Test Preparation Guide for LOMA 280

Learning Objective: Identify the exclusions that insurers sometimes include in individual life insurance policies.

9.

Jutta Kindermann was insured under a $250,000 life insurance policy that contained a typical accidental death benefit rider and a typical two-year suicide exclusion provision. Three years after Ms. Kindermann’s policy was issued, Ms. Kindermann died, and it was determined that she had committed suicide. At the time of her death, the policy was in force, and there were no unpaid premiums or policy loans. In this situation, the insurer most likely was obligated to pay the beneficiary of Ms. Kindermann’s policy (1) (2) (3) (4)

nothing, because Ms. Kindermann committed suicide a return of premiums paid for the policy only the basic death benefit only both the basic death benefit and the accidental death benefit

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 9 Practice Questions | 33

LEARNING OBJECTIVES & PRACTICE QUESTIONS

1.

Chapter Nine

An insurance policy is a contract between the insurer and the policyowner and is subject to the rules of contract law. An insurance policy also is a type of property and, thus, is subject to the principles of property law. In legal terminology, property is classified as either real property or personal property and as tangible property or intangible property. With regard to these classifications, an insurance policy is classified correctly as (1) (2) (3) (4)

tangible real property tangible personal property intangible real property intangible personal property

Learning Objective: Distinguish between primary and contingent beneficiaries and between revocable and irrevocable beneficiaries.

2.

Lindsay Inthachak was the policyowner-insured of a whole life insurance policy. Lindsay designated her husband, Stephen, as the party to receive the policy proceeds following her death. Lindsay designated their daughter, Lily, to receive the policy proceeds if Stephen predeceases Lindsay. In this situation, Stephen is the type of policy beneficiary known as a (1) (2) (3) (4)

3.

contingent beneficiary primary beneficiary secondary beneficiary successor beneficiary

The following statements are about revocable and irrevocable beneficiary designations. Select the answer choice containing the correct statement. (1) A beneficiary designation is said to be revocable if the policyowner has the right to change the beneficiary designation only after obtaining the beneficiary’s consent. (2) The vast majority of beneficiaries of life insurance policies are irrevocable beneficiaries. (3) A revocable beneficiary’s interest in a life insurance policy during the insured’s lifetime is referred to as a “mere expectancy” of receiving the policy proceeds. (4) A beneficiary designation is said to be irrevocable if the policyowner has the unrestricted right to change the designation during the life of the insured.

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

34 | Test Preparation Guide for LOMA 280

Learning Objective: Identify the policy dividend options that most commonly are included in participating life insurance policies, and describe the characteristics of each option.

4.

A participating policy is a type of policy under which the policyowner shares in the insurance company’s divisible surplus through the receipt of policy dividends. A nonparticipating policy is a type of policy in which the policyowner does not share in the insurer’s surplus. The following statements are about participating and nonparticipating life insurance policies. Select the answer choice containing the correct statement. (1) Although policy dividends are not guaranteed to be paid, most insurers periodically pay dividends on their participating life insurance policies that are expected to remain in force over a long term. (2) Generally, the premium rates for participating policies are lower than those for equivalent nonparticipating policies. (3) In setting premium rates for nonparticipating policies, insurers typically use more conservative assumptions regarding mortality, investment earnings, and expenses than they do for equivalent participating policies. (4) A policy dividend is not considered a refund of part of the premiums a participating policyowner paid during a policy year.

5.

A participating life insurance policy is a type of policy under which the policyowner shares in the insurer’s divisible surplus through the receipt of policy dividends. The following statements are about these policy dividends. Select the answer choice containing the correct statement. (1) The amount payable as an annual policy dividend is determined during the risk assessment process in an insurer’s underwriting department. (2) Generally, dividend amounts paid on participating life insurance policies decrease substantially with the age of the policy. (3) The terms of some life insurance policies state that the policy must be in force for two years before any policy dividends are payable. (4) An applicant for a participating policy usually selects a dividend option during the application process and once selected, the dividend option cannot be changed over the life of the policy.

6.

The owner of a participating life insurance policy may receive policy dividends in a number of different ways, called dividend options. Under one type of dividend option, the insurer applies policy dividends toward the payment of renewal premiums. By definition, this dividend option is known as the (1) (2) (3) (4)

accumulation at interest option automatic dividend option cash dividend option premium reduction dividend option

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 9 Practice Questions | 35

7.

When Craig Alred purchased a participating whole life insurance policy on his life, he selected the cash dividend option. After the policy had been in force for five years, Mr. Alred requested that the dividend option be changed to the paid-up additional insurance dividend option. With regard to this situation, it is correct to say that (1) any paid-up additional insurance issued under this new dividend option will be one-year term insurance in an amount equal to the policy’s cash value (2) the premium charged for any paid-up additional insurance issued under this new dividend option will include an amount to cover the insurer’s expenses (3) the insurer will require Mr. Alred to provide satisfactory evidence of insurability before changing to this new dividend option (4) any paid-up additional insurance issued under this new dividend option will be whole life insurance in whatever face amount the dividend can provide at Mr. Alred’s attained age Learning Objective: Identify the methods by which ownership of a life insurance policy can be transferred.

8.

An assignment of a life insurance policy may take one of two forms: an absolute assignment or a collateral assignment. With respect to a collateral assignment, it is correct to say that the assignee’s rights (1) (2) (3) (4)

9.

include all ownership rights granted to the policyowner are limited to those ownership rights that directly concern the monetary value of the policy are permanent, rather than temporary are limited to the right to select a settlement option only

Tim Parnell purchased a $50,000 whole life insurance policy on the life of his daughter, Samantha, shortly after her third birthday. The policy contained a typical change of ownership provision. Using the endorsement method, Tim transferred ownership of the policy to Samantha as a gift when she turned 23. With regard to making the transfer of ownership using the endorsement method in this situation, it most likely is correct to say that (1) Tim must enter into a separate assignment agreement with Samantha that will exist apart from the life insurance policy (2) Tim must make a collateral assignment of the life insurance policy to Samantha (3) the insurer must issue a new life insurance policy that names Samantha as the new policyowner (4) Tim must notify the insurer, in writing, of the change of ownership Learning Objective: Identify the person in a given situation who is entitled to receive the proceeds of a life insurance policy following the insured’s death.

10. Ian Muldoon was the policyowner of a $150,000 life insurance policy insuring the life of his wife, Sarah. The policy named Hannah, Sarah’s mother, as primary beneficiary, and Joseph, Sarah’s brother, as contingent beneficiary. When Sarah died, Ian, Hannah, and Joseph had all predeceased her. This information indicates that the policy proceeds are payable to (1) (2) (3) (4)

Ian’s estate Sarah’s estate Hannah’s estate Joseph’s estate

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

36 | Test Preparation Guide for LOMA 280

Learning Objective: Describe the general rule stated in a simultaneous death act, and explain how that rule is affected if a policy contains a survivorship clause.

11. Sharon Rickett was the policyowner-insured of a life insurance policy that named her husband, Brandon, as the primary beneficiary and their daughter, Abigail, as the contingent beneficiary. Sharon and Brandon were both killed in an automobile accident, and there was no proof as to which of them died first. Sharon’s policy did not provide for common disasters. If the Ricketts lived in a state that has enacted a typical simultaneous death act, and if Abigail was still living at the time of her parents’ deaths, then the proceeds of Sharon’s policy most likely would be payable to (1) (2) (3) (4)

Abigail Sharon’s estate Brandon’s estate no one, because Sharon and Brandon died simultaneously

12. Some life insurance policies include a clause which states that the beneficiary must outlive the insured by a specified period to be entitled to receive the policy proceeds. Under this type of clause, if the beneficiary does not outlive the insured by the specified period of time, then the policy proceeds are paid as if the beneficiary predeceased the insured. As a result, the policy proceeds are more likely to be distributed as the policyowner had intended. By definition, this type of clause is known as a (1) (2) (3) (4)

right of revocation clause succession beneficiary clause survivorship clause key person clause

Learning Objective: Identify the person in a given situation who is entitled to receive the proceeds of a life insurance policy following the insured’s death.

13. According to laws in many countries, if the beneficiary of a life insurance policy wrongfully and intentionally kills the insured, the beneficiary (is / is not) disqualified from receiving policy proceeds. If it is proven that the policy was purchased with the intention to profit from the insured’s death, then the life insurance contract is considered (void / valid). (1) (2) (3) (4)

is / void is / valid is not / void is not / valid

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 9 Practice Questions | 37

Learning Objective: Calculate the proceeds payable under a given life insurance policy following the death of the insured.

14. Nathan Katogir was the policyowner-insured of a $100,000 participating whole life insurance policy with a $100,000 accidental death benefit rider. Mr. Katogir’s $1,150 annual premium was due on June 21. On June 30, Mr. Katogir was killed in an automobile accident. At the time of his death, he had not yet paid his overdue premium. Also at the time of his death, his policy had $4,500 in accumulated policy dividends, including interest, left on deposit with the insurer, and a $2,000 outstanding policy loan. This information indicates that the total death benefit payable to the beneficiary of Mr. Katogir’s policy was (1) (2) (3) (4)

$96,850 $101,350 $196,850 $201,350

Learning Objective: Identify the settlement options that typically are included in life insurance policies, and describe the features of each option.

15. In addition to lump-sum settlements of policy proceeds, insurers also make available to the policyowner and to the beneficiary alternative settlement options for receiving life insurance policy proceeds. With regard to these settlement options, it is correct to say (1) that the life income option typically results in larger installment payments than would be available under the fixed amount or fixed period options (2) that a policyowner who selects the interest option cannot place restrictions on the payee’s right to withdraw the policy proceeds (3) that, under the fixed period option, the payee usually has the right to withdraw only a part of the policy proceeds during the payment period (4) that, under the fixed amount option, the insurer pays equal installments of a stated amount to the payee until the policy proceeds, plus the interest earned, are exhausted

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

38 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Ten

Learning Objective: Define the terms .

1.

,

,

, and

By definition, the person whose lifetime is used to determine the amount of benefits payable under an annuity contract is known as the (1) (2) (3) (4)

2.

,

payee annuitant contract owner annuity consideration

Ravi Patel purchased an annuity on February 1, 2010. Under the terms of the contract, the insurer will begin making annual income payments to Mr. Patel on February 1, 2030. With regard to the contract’s maturity date and annuity period, it is correct to say that Mr. Patel’s contract has a maturity date of (1) (2) (3) (4)

February 1, 2010, and the contract’s annuity period is one year February 1, 2010, and the contract’s annuity period is twenty years February 1, 2030, and the contract’s annuity period is one year February 1, 2030, and the contract’s annuity period is twenty years

Learning Objective: Distinguish between immediate and deferred annuity contracts, singlepremium and flexible-premium annuity contracts, and fixed and variable annuity contracts.

3.

An annuity contract can be classified as either an immediate annuity or a deferred annuity. An annuity contract under which periodic income payments are scheduled to begin more than one annuity period after the date on which the annuity was purchased is (an immediate / a deferred) annuity. For this type of annuity contract, the time period between the contract owner’s purchase of the annuity and the beginning of the payout period is known as the annuity contract’s (liquidation / accumulation) period. (1) (2) (3) (4)

4.

an immediate / liquidation an immediate / accumulation a deferred / liquidation a deferred / accumulation

David Hoddeson, age 58, inherited $300,000 from his father’s estate. Mr. Hoddeson used the entire inheritance as a lump-sum premium payment to purchase an annuity contract that will provide him with monthly periodic income payments, beginning on his 65th birthday. This information indicates that Mr. Hoddeson purchased a (1) (2) (3) (4)

flexible-premium deferred annuity flexible-premium immediate annuity single-premium deferred annuity single-premium immediate annuity

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 10 Practice Questions | 39

5. A variable annuity is an annuity under which the amount of the accumulated value and the amount of the periodic income payments fluctuate in accordance with the performance of one or more specified investment funds. The following statements are about variable annuities. Select the answer choice containing the correct statement. (1) An insurer that issues a variable annuity must guarantee that the contract’s accumulated value will experience no loss of principal and will earn at least a minimum guaranteed interest rate. (2) Federal laws in the United States treat variable annuities as securities that must comply with federal securities laws. (3) Once the contract owner of a variable annuity allocates premium amounts among a number of subaccounts, she cannot change the subaccounts in which future premiums are invested. (4) If the contract owner of a variable annuity allocates premiums among a number of subaccounts, she generally cannot change the percentage of money allocated to specific subaccounts. 6.

Two hybrid types of annuity products that insurers issue are equity-indexed annuities (EIAs) and market value adjusted (MVA) annuities. With regard to these hybrid annuities, it is correct to say that an (1) EIA typically is classified as a variable annuity (2) EIA does not offer any guarantees (3) MVA annuity allows contract owners to move or withdraw premium deposits at certain times stipulated in the contract to take advantage of prevailing market interest rates (4) MVA annuity requires contract owners to be “locked in” with fixed earnings for the life of the contract Learning Objective: Explain standard contract provisions included in individual annuity contracts.

7.

One individual annuity contract provision gives the contract owner a stated period of time— usually 10 to 30 days—after the contract is delivered in which to cancel the contract and receive a full refund of the initial premium paid. This type of individual annuity contract provision is known as the (1) (2) (3) (4)

incontestability provision free-look provision entire contract provision dividends provision

Learning Objective: Describe the guaranteed benefits included in some variable annuity contracts.

8.

Some variable annuity contracts guarantee that up to a certain percentage of the amount paid into the contract will be available for withdrawals annually during the accumulation period, even if subaccount investments perform poorly. This guaranteed benefit is known as a (1) (2) (3) (4)

guaranteed minimum withdrawal benefit (GMWB) guaranteed minimum death benefit (GMDB) guaranteed minimum income benefit (GMIB) guaranteed minimum accumulation benefit (GMAB)

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

40 | Test Preparation Guide for LOMA 280

Learning Objective: Explain the fees and charges typically paid by annuity contract owners.

9.

Antoine Fargo purchased a variable annuity from the Habersham Insurance Company. The contract specifies that, each time Mr. Fargo withdraws money from the product, Habersham will charge a fee, expressed as a percentage of the withdrawal. This percentage will decrease over time, until eventually Mr. Fargo can withdraw funds without incurring a charge. By definition, this fee is known as a (1) (2) (3) (4)

contingent deferred sales charge (CDSC), and it is considered a front-end sales charge contingent deferred sales charge (CDSC), and it is considered a back-end sales charge mortality and expense risk (M&E) charge, and it is considered a front-end sales charge mortality and expense risk (M&E) charge, and it is considered a back-end sales charge

Learning Objective: Identify and distinguish among the types of payout options available under annuity contracts.

10. Greta Anderson was the contract owner, the annuitant, and the payee of a life with refund annuity for which she paid a single premium of $75,000. The annuity will provide an income payment of $5,000 per year during Greta’s lifetime. Greta died five years after income payments began, and at the time of her death, she had received periodic income payments totaling $25,000. In this situation, the contingent payee named in Greta’s annuity contract is entitled to receive (1) (2) (3) (4)

nothing a single payment of $5,000 $50,000 $75,000

Learning Objective: List the factors that affect the amount of an annuity’s periodic income payments and describe the effect of each factor.

11. For all types of life annuities, the number and timing of periodic income payments depends on mortality experience as well as on the frequency of payments and the total length of the payout period. All other factors being equal, it generally is correct to say that the shorter the time period that an annuitant is expected to live, the (1) (2) (3) (4)

larger the periodic income payments will be smaller the periodic income payments will be greater the number of periodic income payments that will be made lower the annuity contract’s stated interest rate will be

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 10 Practice Questions | 41

Learning Objective: Describe two types of favorable income tax treatment for annuities in various jurisdictions, and compare the income tax treatment of traditional IRAs and Roth IRAs.

12. In the United States, the tax treatment of an individual retirement arrangement (IRA) varies depending on whether it is a traditional IRA or a Roth IRA. One correct statement about a (1) traditional IRA is that contributions are not tax-deductible (2) traditional IRA is that investment earnings accumulate and are distributed on a taxfree basis (3) Roth IRA is that federal tax laws typically impose tax penalties if an individual who is younger than age 59½ makes a withdrawal from an IRA (4) Roth IRA is that there are no annual contribution limits

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

42 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Eleven

Learning Objective: Identify the parties to a group insurance contract, and distinguish between contributory and noncontributory group insurance plans.

1.

The parties to a master group insurance contract are the (1) (2) (3) (4)

2.

group policyholder and the insurer only group policyholder and the group insureds only insurer and the group insureds only insurer, the group policyholder, and the group insureds

The following statements are about group insurance contracts. Select the answer choice containing the correct statement. (1) If a group policyholder pays the entire premium amount for the group coverage, then the group insurance plan is a contributory plan. (2) Each group member must receive individual copies of the master group contract. (3) Each group member insured under a group life insurance policy has the right to name the beneficiary who will receive the benefit payable upon that group member’s death. (4) Group policyholders are not required to provide each group member with a certificate of insurance or a separate benefit booklet that describes the group insurance plan.

3.

An insurance contract is an informal contract that must be formed in accordance with the rules of contract law. Thus, to form a valid group insurance contract, certain requirements must be met. The following statements are about these requirements. Select the answer choice containing the correct statement. (1) The group insureds covered under the group insurance contract and the insurer must mutually agree to the contract’s terms. (2) Both the proposed group insureds and the group policyholder must have contractual capacity in order to enter into a contract for group insurance. (3) The group policyholder must prove an insurable interest in the group insureds so that the contract will have been formed for a lawful purpose. (4) The group policyholder and the insurer must exchange legally adequate consideration in order for the contract to be valid.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 11 Practice Questions | 43

Learning Objective: Describe the operation of the probationary period and the actively-atwork requirement.

4.

Rafael Montero accepted a job with the Beehive Company on June 5, 2010, and actually began working for Beehive on June 10, 2010. Beehive provides both noncontributory group life insurance and contributory group health insurance to its employees. Beehive’s employee benefits plan requires a typical 30-day probationary period and a 31-day eligibility period. This information indicates that Mr. Montero’s group life insurance coverage will become effective on (1) June 10, and he will be eligible to enroll for group health insurance coverage during a 31day period that begins on June 10 (2) June 10, and he will be eligible to enroll for group health insurance coverage during a 31day period that begins on July 10 (3) July 10, and he will be eligible to enroll for group health insurance coverage during a 31day period that begins on July 10 (4) July 10, and he will be eligible to enroll for group health insurance coverage during a 31day period that begins on August 10 Learning Objectives: Compare group underwriting with individual underwriting, and identify the risk characteristics that group underwriters consider.

5.

The following groups have applied for group life insurance coverage from Palmino Financial. Palmino’s group underwriting guidelines are typical of most insurers. Select the answer choice describing a group that will likely FAIL to qualify for group insurance coverage. (1) RBG Associates is a small group of retired individuals who banded together as a group for the sole purpose of obtaining group life insurance coverage at reasonable rates. (2) In the United States, the Milltown Labor Union promotes the welfare, interests, and rights of its members. (3) The Prism Company is a professional organization for accountants that provides continuing education classes and organized travel opportunities and seeks to provide voluntary group insurance coverage to its members. (4) CB&C Association is a group consisting of the eligible employees of several small employers and two labor unions that are in the building industry. Learning Objective: Identify the common types of insurable groups.

6.

Group underwriters consider a number of specific characteristics of a group when evaluating whether that group is an acceptable risk. One factor that would tend to make an employeremployee group eligible for group insurance coverage is if the (1) employer plans to pay no portion of the group insurance premium (2) employer anticipates experiencing excessive changes in the group membership (3) group will maintain at least a 25% participation level at all times in the group insurance plan (4) group has a sufficient number of new members periodically entering the group so that both the group’s size and its age distribution remain stable

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

44 | Test Preparation Guide for LOMA 280

Learning Objective: Describe the purpose and operation of benefit schedules in group life insurance policies.

7.

Group life insurance policies typically include a schedule that defines the amount of life insurance the policy provides for each insured. For example, the schedule might provide life insurance coverage to all eligible employees in an amount equal to one year’s salary. In another schedule, the amount of life insurance coverage might vary depending on whether the employee is a senior executive, a manager, or a nonmanagement employee. By definition, this schedule is known as (1) (2) (3) (4)

a blended rating schedule a benefit schedule a self-administered group plan schedule an experience refund schedule

Learning Objective: Explain the method insurers use to calculate group insurance premiums.

8.

Celestial Financial Services is negotiating with the following two prospective clients for group life insurance coverage: The Spiral Company is a newly formed organization that employs nine people. The Galaxy Company is seeking life insurance coverage for its 1,500 employees. Galaxy is presently insured by another insurer. With regard to the methods used to calculate the premium rate for group insurance coverage and these two companies, it most likely is correct to say that Celestial Financial will use (1) (2) (3) (4)

9.

manual rating for both Spiral and Galaxy manual rating for Spiral and experience rating for Galaxy experience rating for both Spiral and Galaxy experience rating for Spiral and manual rating for Galaxy

The Fencepost Corporation provides $50,000 of noncontributory group life insurance coverage for each of its eligible employees. The current monthly premium rate for this coverage is $0.50 per $1,000 of coverage. In February, Fencepost had 100 eligible employees. On March 1, Fencepost hired five additional employees who immediately became eligible for group life insurance coverage. During the month of March, the number of Fencepost employees remained constant. This information indicates that the amount of premium payable for the month of March was (1) (2) (3) (4)

$25 $125 $2,500 $2,625

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 12 Practice Questions | 45

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Twelve

Learning Objective: Identify and describe typical provisions contained in a group life insurance policy and compare these provisions with similar provisions contained in individual life insurance policies.

1.

Group life insurance policies usually include a number of standard provisions, many of which are similar to provisions found in individual life insurance policies. The following statements are about provisions typically found in group life insurance policies. Select the answer choice containing the correct statement. (1) The incontestability provision in a group life insurance policy prohibits an insurer from contesting an individual group member’s coverage without contesting the validity of the master group contract itself. (2) Some group life insurance policies include a conversion privilege, which allows a group insured whose coverage terminates for certain reasons to convert her group life insurance coverage to an individual life insurance policy, but only after presenting evidence of her insurability. (3) Group life insurance policies typically include a misstatement of age provision but typically do not include a misstatement of sex provision. (4) The grace period provision in a group life insurance policy specifies that, if the policy terminates for nonpayment of premiums, then the group policyholder is not legally obligated to pay the premium for the coverage provided during the grace period.

2.

An insured group member under a group life insurance policy is prohibited from naming the group policyholder as the beneficiary of the policy UNLESS the policy is provided under a (1) (2) (3) (4)

group creditor life policy single-employer group policy multiple-employer group policy labor union group policy

Learning Objective: Identify the features of group term life insurance plans, group accidental death and dismemberment plans, group cash value insurance plans, and group creditor life insurance plans.

3.

One type of group life insurance policy is yearly renewable term (YRT) insurance plans. With regard to group YRT plans, it is correct to say that (1) the insurer typically has the right to change the premium rate of a group YRT insurance plan each year when the coverage is renewed (2) few group life insurance policies are YRT insurance plans (3) evidence of insurability is required from the group insureds each year when the YRT insurance coverage is renewed (4) group YRT insurance plans build a cash value

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

46 | Test Preparation Guide for LOMA 280

4.

Julia Gallagher is covered under the group life insurance plan her employer provides. The group insurance policy provides $125,000 of group term life insurance, $50,000 of group accidental death and dismemberment (AD&D) insurance, and $25,000 of business travel accident insurance. If Ms. Gallagher dies in an accident while she is traveling on business for her employer, then her beneficiary would be entitled to receive (1) (2) (3) (4)

5.

One commonly offered group cash value life insurance plan is a group paid-up plan, which combines paid-up whole life insurance with decreasing amounts of term life insurance. With regard to the premium contributions that employees and employers pay for these group paid-up plans, it is correct to say that the employees’ premium contributions typically pay for (1) (2) (3) (4)

6.

$0 $75,000 $125,000 $200,000

both the paid-up whole life insurance and the decreasing term life insurance the paid-up whole life insurance only the decreasing term life insurance only neither the paid-up whole life insurance nor the decreasing term life insurance

Some insurers offer group universal life (UL) plans and/or group variable universal life (VUL) plans. With regard to these two group plans, it is correct to say (1) that, under a group UL plan, the employer typically pays a portion of the policy premium (2) that, under a group UL plan, employees are not permitted to choose the amount of premium they wish to pay (3) that, under a group VUL plan, the employer typically pays the entire policy premium (4) that the participants in a group VUL plan are given a choice of different subaccount options for investing their cash values Learning Objective: Identify the components of a group retirement plan and describe the types of provisions that a plan document contains.

7.

One component of a retirement plan is a detailed legal agreement that establishes the existence of an employer-sponsored retirement plan and specifies the rights and obligations of various parties to the plan. Among other things, this component describes the individuals whom the plan covers, the benefits that the plan provides, and the method for funding the plan. This component is referred to as the (1) (2) (3) (4)

plan document funding vehicle plan sponsor plan administrator

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 12 Practice Questions | 47

8.

A retirement plan’s benefit formula describes the calculation of the plan sponsor’s financial obligation to plan participants. One type of benefit formula allows the plan sponsor to know in advance what it will cost to fund the retirement plan each year. This type of benefit formula most likely is the (1) (2) (3) (4)

defined benefit formula that is commonly used in pension plans defined benefit formula that is commonly used in savings plans defined contribution formula that is commonly used in pension plans defined contribution formula that is commonly used in savings plans

Learning Objective: Identify and describe the four common types of employer-sponsored retirement plans.

9.

In the United States, two types of employer-sponsored retirement plans are a 401(k) plan and a stock bonus plan. With regard to these two types of retirement plans, it is correct to say that, under a (1) 401(k) plan, the amount of an employee’s plan contribution is included in the employee’s current taxable income (2) 401(k) plan, the employee enters into a salary reduction arrangement that permits the employer to deduct the amount of the employee’s plan contributions from her salary (3) stock bonus plan, contributions are dependent upon company profits (4) stock bonus plan, retirement assets are accumulated on behalf of participants, and such a plan promises to provide a monthly retirement income benefit

10. In the United States, employers sometimes establish for employees a retirement savings plan known as a profit sharing plan. One characteristic of a typical profit sharing plan is that (1) employer contributions may fluctuate each year, but the employer must make a minimum contribution to the plan each year (2) the plan guarantees a specified monthly retirement income benefit to employees (3) the amount of an employer’s contribution each year is determined by the employer’s profits for that year (4) employees are never allowed to contribute to such plans 11. In the United States, the Old Age, Survivors, Disability and Health Insurance (OASDHI) Act, or Social Security, provides retirement income benefits to qualified residents. In Canada, either the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP) provides retirement benefits. With regard to whether these programs require mandatory contributions from covered employees and their employers, it is correct to say that (1) (2) (3) (4)

both the Social Security program and the CPP and QPP require mandatory contributions only the Social Security program requires mandatory contributions only the CPP and QPP require mandatory contributions neither the Social Security program nor the CPP and QPP require mandatory contributions

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

48 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Thirteen

Learning Objective: Identify some common types of basic medical expense coverage, and describe the benefits that each provides.

1.

Major medical expense coverage specifies the different types of medical treatments, supplies, and services that are included under the coverage, as well as those expenses that are excluded from the coverage. From the answer choices below, select the response that correctly identifies a medical expense that typically is included under major medical expense coverage, and a medical expense that typically is excluded from such coverage. Included in coverage (1) anesthesia and oxygen (2) elective cosmetic surgery (3) hospital charges for room and board in semiprivate room (4) routine eye examinations and corrective lenses

2.

Excluded from coverage surgical supplies and services childhood immunizations routine dental treatments speech therapy

In its major medical expense policies, the Nova Insurance Company specifies that the maximum benefit amount payable for a particular service will be 90% of the amount that medical care providers within a particular geographic region commonly charge for that same service. This information indicates that Nova bases the maximum benefit amount payable for a particular service on that service’s (1) (2) (3) (4)

manual rate blended rate vesting requirement usual, customary, and reasonable (UCR) fee

Learning Objective: Identify the purpose of expense participation features in major medical expense policies, and give examples of commonly used expense participation methods.

3.

Ademe Bekele is covered by a comprehensive major medical expense policy that specifies a $700 calendar-year deductible, a 15% coinsurance requirement, and a $5,000 maximum out-ofpocket provision. In March 2010, Mr. Bekele was hospitalized for four days for treatment of pneumonia. During that period of hospitalization, Mr. Bekele incurred $12,500 in covered medical expenses. If Mr. Bekele incurs no other medical expenses during 2010, then his out-ofpocket medical expenses for 2010 will total (1) (2) (3) (4)

$700 $1,770 $2,470 $5,000

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 13 Practice Questions | 49

Learning Objective: Identify and describe common types of medical expense coverage other than basic and major medical expense coverage.

4.

In the United States, most insureds are covered by some type of managed care plan. There are several types of managed care plans, but most of them share some common characteristics. One such characteristic is that managed care plans typically (1) shift all of the financial risk to the insurer rather than to the health care provider (2) require plan members to pay a copayment, in addition to premium payments, to the provider when a plan member receives services from that provider (3) adjust the amount of the plan member’s monthly premium payment to reflect the number of times the plan member used provider services (4) exclude extensive preventive care programs, such as prenatal and well-baby care, routine physical examinations, and screening programs

5.

The United States federal government provides certain medical expense benefits through a federal government program known as Medicare. Medicare provides medical expense benefits to (1) (2) (3) (4)

persons over the age of 65 and persons with qualifying disabilities persons over the age of 65 only persons with qualifying disabilities only all persons in the United States, regardless of age or disability

Learning Objective: Identify the criteria used to classify disability income coverage as either short-term coverage or long-term coverage.

6.

The coverage provided by individual disability income insurance policies is classified as either short-term or long-term coverage, depending on the length of the benefit period. For example, most short-term individual disability income coverage provides a maximum benefit period ranging from (13 to 26 weeks / one to five years). The maximum benefit period provided by long-term individual disability income coverage for illnesses commonly extends (for one year / until the insured reaches age 65). (1) (2) (3) (4)

13 to 26 weeks / for one year 13 to 26 weeks / until the insured reaches age 65 one to five years / for one year one to five years / until the insured reaches age 65

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

50 | Test Preparation Guide for LOMA 280

Learning Objective: Identify the various definitions of that have commonly been included in disability income insurance policies, and distinguish among those definitions.

7.

Joel Cohen’s disability income insurance policy contains the current usual definition of total disability that is included in most disability income policies. According to his policy, the definition of total disability changes after the insured has been totally disabled for two years. This information indicates that, should Mr. Cohen become disabled, then at the end of the initial two-year period of disability, he will be considered totally disabled only if his disability (1) prevents him from working at any occupation for which he is reasonably fitted by education, training, or experience (2) prevents him from performing the essential duties of his own previous occupation (3) prevents him from performing the essential duties of any occupation (4) causes him to earn less than he earned before becoming disabled

8.

The following statements are about disability income insurance coverage. Select the answer choice containing the correct statement. (1) As a general rule, the benefit amount provided by disability income coverage is intended to fully replace the insured’s pre-disability earnings. (2) Most disability income policies are designed to provide benefits beginning on the first day of an insured’s disability. (3) A presumptive disability is a stated condition that, if present, automatically causes the insured to be considered totally disabled. (4) Disability income benefits typically should be set low enough so as to cause the disabled insured to experience a drastic reduction in income and lifestyle. Learning Objective: Identify and describe some supplemental benefits that may be included in a disability income insurance policy.

9.

Nancy Tong purchased an individual disability income policy that specifies a flat benefit amount. The policy contains a supplemental benefit that grants Ms. Tong the right to increase the benefit amount in accordance with commensurate increases in her income, without providing evidence of insurability. This information indicates that Ms. Tong’s disability income policy contains a supplemental benefit known as a (1) (2) (3) (4)

guaranteed minimum income benefit (GMIB) cost-of-living adjustment (COLA) benefit future purchase option benefit partial disability benefit

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 13 Practice Questions | 51

Learning Objective: Describe the benefit triggers for long-term care insurance policies.

10. For this question, if answer choices (1) through (3) are all correct, select answer choice (4). Otherwise, select the one correct answer choice. Long-term care benefits generally are payable if an insured either loses his physical functional capacity to perform at least a specified number of the activities of daily living (ADLs) without assistance or has a severe cognitive impairment. With regard to ADLs, it is correct to say that activities that are considered to be ADLs include (1) (2) (3) (4)

eating bathing dressing all of the above

Learning Objective: Describe the methods insurers use to pay long-term care benefits.

11. Some long-term care (LTC) policies specify that the insurer will pay the insured the amount of covered LTC expenses per day up to the stated maximum daily benefit amount. For example, if an insured enters a nursing home costing $100 per day and the policy provides a daily benefit amount of $125, then the insured will receive a benefit of $100 per day, the actual cost for nursing home care. In this scenario, the LTC policy includes a method for calculating the LTC benefit that is known as the (1) (2) (3) (4)

benefit trigger method indemnity method reimbursement method portability method

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

52 | Test Preparation Guide for LOMA 280

LEARNING OBJECTIVES & PRACTICE QUESTIONS

Chapter Fourteen

Learning Objective: Identify and describe the provisions that individual health insurance policies typically include.

1.

One individual health insurance policy provision limits the time during which a claimant who disagrees with the insurer’s claim decision has the right to sue the insurer to collect the amount the claimant believes she is owed under the policy. By definition, this provision is known as (1) (2) (3) (4)

a claims provision a legal actions provision a stop-loss provision an overinsurance provision

Learning Objective: Describe the factors that insurers consider in the financial design of individual health insurance products.

2.

For this question, select the answer choice containing the terms that correctly complete the blanks labeled A and B in the paragraph below. Underwriting of applications for individual health insurance focuses on the degree of morbidity risk that a proposed insured represents. One factor that can affect the degree of morbidity risk a proposed insured presents is whether the proposed insured is male or female. In general, females experience a A morbidity rate than do males of the same age. Therefore, the cost of providing health insurance coverage to females generally is B than the cost of providing health insurance coverage to males of the same age. (1) (2) (3) (4)

3.

A higher higher lower lower

B higher lower higher lower

A number of jurisdictions require an insurer’s loss ratio to be at least a minimum stated percentage. The loss ratio for a block of policies generally is stated as the percentage of (1) (2) (3) (4)

premiums the insurer paid out in benefits for the block of policies total premiums the insurer received during the grace period total premiums the insurer paid out in premium refunds only total premiums the insurer lost because of policy lapses only

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 14 Practice Questions | 53

Learning Objective: Calculate the amount of benefits payable when an insured is covered by two group health insurance policies that contain a coordination of benefits (COB) provision.

4.

Rachel Culpepper is covered under two group medical expense plans; one plan is through her employer and the second plan is through her husband’s employer. Both plans specify a $500 deductible and a 20% coinsurance requirement. Both plans contain a coordination of benefits (COB) provision, but neither plan contains a nonduplication of benefits provision. Ms. Culpepper’s primary plan is the plan provided through her employer. During the current calendar year, Ms. Culpepper incurred $5,600 in allowable medical expenses. This information indicates that the amount of the benefit Ms. Culpepper is entitled to receive under her husband’s plan is (1) (2) (3) (4)

5.

$1,020 $1,520 $3,580 $4,080

Damon and Andrea Utsey have one young daughter, Abigail. Both Damon and Andrea work full time for employers that provide group medical expense coverage to employees and their spouses and dependents. Both group plans include coordination of benefits (COB) provisions, and both plans specify that the birthday rule will be used to determine which plan will be the primary payer if an individual is covered as a dependent under both plans. The dates of birth for the members of the Utsey family are as follows: Damon’s date of birth is October 9, 1970 Andrea’s date of birth is April 20, 1972 Abigail’s date of birth is October 15, 2004 In this situation, the plan that most likely will be considered the primary provider of benefits for Abigail is the plan provided by (1) Damon’s employer, because Damon is older than Andrea (2) Damon’s employer, because his birth date falls closer to Abigail’s birth date than does Andrea’s birth date (3) Damon’s employer, because the majority of the members of the Utsey family have birthdays during the same month as Damon (4) Andrea’s employer, because her birth date falls earlier in the calendar year than does Damon’s birth date

Copyright © 2011 LL Global, Inc. All rights reserved. Answers to Practice Questions begin on page 55

54 | Test Preparation Guide for LOMA 280

Learning Objective: Distinguish between fully insured plans and self-insured plans.

6.

The following statements are about ways in which a group insurance plan’s claim costs and administrative expenses are paid using funding mechanisms. Select the answer choice containing the correct statement. (1) Most group long-term disability income plans are fully insured plans. (2) Under a fully insured group insurance plan, the group policyholder bears the responsibility and the risk for all claim payments. (3) Under a fully insured group insurance plan, if the dollar amount of the claims submitted to the insurer is less than the dollar amount of premiums collected, the insurer must refund the difference to the group policyholder. (4) Most group long-term care insurance plans are self-insured plans. Learning Objective: Describe the operation of a self-insured group health insurance plan, including the use of stop-loss insurance and plan administration.

7.

The Skyline Company provides group medical expense and disability income insurance coverage to its employees through a self-insured plan. Skyline purchased stop-loss coverage to protect itself from the risk of having several catastrophic medical claims in a given year. Under the terms of the stop-loss coverage, the insurer will become responsible for paying claims when Skyline’s total claims exceed $1 million within the contract year. This information indicates that Skyline purchased the type of stop-loss coverage known as (1) (2) (3) (4)

specific stop-loss coverage aggregate stop-loss coverage individual stop-loss coverage salary continuation coverage

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Answers to Practice Questions | 55

Answers to Practice Questions Chapter 1 1. 2. 3. 4. 5. 6. 7. 8.

p. 21......................................................... 2 pp. 22-23 ................................................. 1 pp. 26-27, 28, 29 ..................................... 2 p. 27......................................................... 3 p. 28......................................................... 1 p. 30......................................................... 3 pp. 31-32 ................................................. 4 pp. 32-33 ................................................. 2

Chapter 2 1. 2. 3. 4. 5. 6. 7.

pp. 36-37 ................................................. 2 p. 38......................................................... 1 pp. 38, 40................................................. 1 p. 41......................................................... 3 p. 43......................................................... 4 p. 43......................................................... 2 p. 44......................................................... 3

Chapter 3 1. 2. 3. 4. 5.

pp. 49, 53 ................................................. 1 pp. 49, 56................................................. 2 pp. 50-51 ................................................. 3 pp. 51-53 ................................................. 2 p. 55......................................................... 4

Chapter 4 1. 2. 3. 4. 5. 6. 7. 8. 9.

p. 61......................................................... 3 pp. 61-62 ................................................. 4 p. 62......................................................... 3 pp. 62-64 ................................................. 4 p. 65......................................................... 4 p. 67......................................................... 4 p. 68......................................................... 1 pp. 68-69 ................................................. 3 pp. 69-70 ................................................. 3

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Chapter 5 1. 2. 3. 4. 5. 6. 7.

p. 74; c. 1, p. 27 ....................................... 4 p. 74......................................................... 2 p. 80......................................................... 4 pp. 81-82 ................................................. 2 pp. 83-84 ................................................. 1 pp. 84-86 ................................................. 4 pp. 86-87 ................................................. 2

Chapter 6 1. 2. 3. 4. 5. 6. 7. 8. 9.

p. 89......................................................... 4 pp. 92-93 ................................................. 1 pp. 93-94 ................................................. 2 pp. 94-95 ................................................. 3 p. 95......................................................... 2 p. 98......................................................... 2 pp. 100, 102............................................. 1 pp. 102-103 ............................................. 3 pp. 103-104 ............................................. 1

Chapter 7 1. 2. 3. 4. 5. 6. 7.

pp. 107-108, 109 ..................................... 2 p. 110....................................................... 1 pp. 110-111 ............................................. 3 p. 111....................................................... 4 pp. 111-114 ............................................. 3 p. 115....................................................... 3 pp. 115-116 ............................................. 3

Chapter 8 1. 2. 3. 4. 5. 6. 7. 8. 9.

pp. 118-119 ............................................. 1 p. 119....................................................... 1 pp. 120-122 ............................................. 4 pp. 122-123 ............................................. 3 pp. 124-125 ............................................. 4 pp. 125-126 ............................................. 2 pp. 126-127 ............................................. 2 pp. 128-129 ............................................. 3 p. 131; c. 7, p. 111 ................................... 3

56 | Test Preparation Guide for LOMA 280

Chapter 9

Chapter 12

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

p. 134....................................................... 4 p. 135....................................................... 2 pp. 136-137 ............................................. 3 pp. 138-139 ............................................. 1 p. 139....................................................... 3 p. 139....................................................... 4 p. 140....................................................... 4 p. 143....................................................... 2 p. 144....................................................... 4 p. 145....................................................... 1 pp. 145-146 ............................................. 1 p. 146....................................................... 3 p. 147....................................................... 1 pp. 147-148 ............................................. 4 pp. 149-150 ............................................. 4

Chapter 10 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

p. 154....................................................... 2 p. 154....................................................... 3 p. 155....................................................... 4 pp. 156, 157............................................. 3 pp. 158-159 ............................................. 2 p. 158....................................................... 3 p. 160....................................................... 2 p. 162....................................................... 1 p. 162....................................................... 2 p. 165....................................................... 3 p. 166....................................................... 1 p. 169....................................................... 3

Chapter 11 1. 2. 3. 4. 5. 6. 7. 8. 9.

p. 173....................................................... 1 pp. 173, 174, 175..................................... 3 p. 175....................................................... 4 p. 176....................................................... 3 p. 178....................................................... 1 pp. 179-180 ............................................. 4 pp. 180-181 ............................................. 2 pp. 182-183 ............................................. 2 pp. 183-184 ............................................. 4

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

pp. 188, 189, 190..................................... 3 pp. 189-190, 193 ..................................... 1 p. 191....................................................... 1 pp. 191-192 ............................................. 4 p. 192....................................................... 2 p. 193....................................................... 4 p. 194....................................................... 1 pp. 195, 196-198 ..................................... 4 p. 198....................................................... 2 p. 198....................................................... 3 pp. 198-199 ............................................. 1

Chapter 13 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

pp. 204, 206............................................. 3 p. 204....................................................... 4 pp. 205-206 ............................................. 3 p. 208....................................................... 2 p. 210....................................................... 1 p. 211....................................................... 4 pp. 211-212 ............................................. 1 p. 213....................................................... 3 p. 215....................................................... 3 p. 216....................................................... 4 p. 217....................................................... 3

Chapter 14 1. 2. 3. 4. 5. 6. 7.

p. 222....................................................... 2 p. 223....................................................... 1 p. 225....................................................... 1 pp. 226-227, 228 ..................................... 2 pp. 228-229 ............................................. 4 pp. 229-230 ............................................. 1 p. 231....................................................... 2

Sample Examination | 57

Sample Examination

Learning Objectives for the Sample Examination Questions. Learning objectives for the Sample Examination questions appear only in the interactive version of the Sample Examination, which is available in the Course Portal under Exam Prep. The learning objective associated with each question appears in the answer explanation for the question’s correct response. Additional information on how to use learning objectives to guide your study and preparation for the exam appears in “Study Tips,” which can be accessed in the Course Portal under Exam Prep.

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

58 | Test Preparation Guide for LOMA 280

This examination contains 60 objective questions. Each question is valued at 1.667 points. For each question, circle the number of your chosen response. 1.

One primary focus of insurance regulation is to ensure that insurance companies conduct their businesses fairly and ethically. For example, many countries have laws that prohibit insurers from engaging in unfair trade practices. This type of insurance regulation is known, by definition, as (1) (2) (3) (4)

2.

To be considered insurable, a risk—a potential loss—must have certain characteristics. The following statements are about the characteristics of insurable risks. Select the answer choice that contains the correct statement. (1) (2) (3) (4)

3.

The only type of risk that can be insured is speculative risk. A pure risk is not insurable because it involves the possibility of gain. In order for a potential loss to be insurable, the element of chance must not be present. For most types of insurance, in order for a potential loss to be insurable, the loss must be definite in terms of time and amount.

A contract must be supported by an exchange of legally adequate consideration. When Jacques Renard purchased a life insurance policy from the Prescott Life Insurance Company, Prescott provided legally adequate consideration by promising to pay the policy benefit if Mr. Renard dies while the policy is in force. Mr. Renard provided legally adequate consideration for the life insurance contract by submitting to Prescott the (1) (2) (3) (4)

4.

market conduct regulation solvency regulation prudential regulation securities regulation

application only initial premium only application and the initial premium initial premium and subsequent renewal premiums

Variable universal life (VUL) insurance combines the features of variable life insurance and universal life insurance. One typical feature of variable universal life insurance policies is that (1) they guarantee investment earnings and cash values (2) they are not considered securities because the insurer assumes the investment risk of a VUL policy (3) insurers place the cash values of VUL policies in their general accounts (4) policyowners can choose whether the death benefit will remain level or will vary along with changes in the investment earnings of subaccounts

5.

By definition, the person or party who is to receive the policy proceeds of a life insurance policy under a settlement option is known as the (1) (2) (3) (4)

assignor assignee payee preference beneficiary

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 59

6.

Liza Nagel was the policyowner-insured of a $200,000 life insurance policy. Ms. Nagel died while the policy was in force, and the beneficiary submitted a claim for the policy benefit. A claim examiner used the following information to calculate the amount of proceeds payable: $350 in declared but unpaid policy dividends $600 in accumulated policy dividends left on deposit with the insurer $10,000 in paid-up additions $650 premium due and unpaid $5,000 outstanding policy loan This information indicates that the total benefit amount payable on Ms. Nagel’s life insurance policy is (1) (2) (3) (4)

7.

$183,400 $194,700 $205,300 $214,100

The Westcott Health Insurance Company is establishing initial premium rates to charge the following two groups for group health insurance: The Camelot Corporation is a large company with over 10,000 employees who are eligible for group health insurance coverage. Camelot has been insured by another health insurance company for the past five years. The Pixie Company is a small company with 10 employees who are eligible for group health insurance coverage. Pixie has been insured by another health insurance company for the past two years. From the following answer choices, select the response that correctly identifies the method(s) Westcott most likely will use to calculate the initial premium rates for these two groups. (1) (2) (3) (4)

8.

Camelot manual rating manual rating blended rating experience rating

Pixie manual rating experience rating experience rating manual rating

The Calypso Company provides group life insurance coverage to its eligible employees. The group insurance premiums are payable monthly. During one month, eight new employees enrolled in Calypso’s group life insurance plan, and no insured employees left the group. With respect to the effect that this increase in insured group members had on Calypso’s monthly premium amount and premium rate, it is correct to say that the monthly premium amount (1) (2) (3) (4)

increased, and the premium rate per $1,000 of coverage also increased increased, but the premium rate per $1,000 of coverage did not change did not change, and the premium rate per $1,000 of coverage also did not change did not change, but the premium rate per $1,000 of coverage increased

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

60 | Test Preparation Guide for LOMA 280

9.

The Banyan Company sponsors a defined contribution retirement plan for its eligible employees. The vesting requirements and other terms of Banyan’s plan are specified in a plan document. Employee participation in the plan is voluntary. The following statements are about Banyan’s retirement plan. Select the answer choice that contains the correct statement. (1) One benefit to Banyan of using a defined contribution plan is that it knows in advance what it will cost to fund the plan each year. (2) Banyan’s use of a defined contribution plan indicates that the benefit a plan participant will receive is determined in advance of the participant’s retirement. (3) The vesting requirements in Banyan’s plan document specify the requirements employees must meet to be eligible to participate in the plan. (4) The fact that employee participation in Banyan’s plan is voluntary indicates that all eligible group members are automatically enrolled as plan participants.

10. The Fauna Company self-insures medical expense coverage for its employees. Fauna purchased insurance from the Luray Insurance Company to place a maximum dollar limit on Fauna’s liability for paying health insurance claims. The insurance contract provides that Luray will begin to reimburse Fauna for claims when Fauna has paid a total of $500,000 in claims within a 12-month period. The type of insurance coverage that Fauna purchased from Luray is known as (1) (2) (3) (4)

specific stop-loss coverage first-dollar coverage individual stop-loss coverage aggregate stop-loss coverage

11. The Crescent Insurance Company sold a life insurance policy to Drew Fleming, age 16. Drew resides in a jurisdiction where the minimum permissible age to purchase life insurance is 18. With respect to whether the contract between Crescent and Drew is legally enforceable, it is correct to say that the contract most likely is (1) voidable by Crescent, and Crescent may reject the contract at any time (2) voidable by Drew, and Drew may reject the contract before he reaches age 18 or within a reasonable time afterward (3) voidable by Drew, and Drew may reject the contract only after he reaches age 18 (4) valid, and neither Crescent nor Drew may reject the contract 12. Today, the financial services industry is characterized by the movement toward a single financial institution being able to serve a customer’s banking, insurance, and securities needs. This movement is commonly known as (1) (2) (3) (4)

portability incorporation globalization convergence

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 61

13. One characteristic of cash value life insurance that distinguishes it from term life insurance is that cash value life insurance policies such as whole life policies typically (1) provide coverage at a premium rate that is lower than the premium rate charged for comparable term life insurance policies (2) provide coverage at a premium rate that increases each year as the insured ages, whereas the premium rate for a term life insurance policy remains level throughout the life of the policy (3) provide a savings element in addition to insurance coverage, whereas term life insurance policies provide insurance coverage only (4) provide a death benefit only if the insured dies during the period specified in the policy, whereas term life insurance policies provide insurance coverage for the entire lifetime of the insured, as long as the policy remains in force 14. Individual health insurance policies typically include a provision that limits the time during which a claimant who disagrees with the insurer’s claim decision has the right to sue the insurer to collect the amount the claimant believes is owed under the policy. This individual health insurance policy provision is known as a (1) (2) (3) (4)

stop-loss provision legal actions provision claims provision conversion provision

15. Sylvie Hyde is the policyowner-insured of a whole life insurance policy that includes a typical spouse and children’s insurance rider. Sylvie’s spouse, Van, and their three children are covered under the rider. One true statement about this spouse and children’s insurance rider is that the (1) insurance coverage on Van also is whole life insurance coverage (2) insurance coverage on each child is term life insurance that will expire when that child reaches a stated age (3) premium for the rider will increase if Sylvie adds children who are born or adopted after the issue date of the insurance rider (4) premium for the rider increases as Van and the children age 16. By definition, variable life (VL) insurance is a form of cash value life insurance in which (1) premiums and the amount of the death benefit are fixed for the life of the policy (2) premiums are fixed, but the amount of the death benefit may vary over the life of the policy (3) premiums are flexible, and the amount of the death benefit may vary over the life of the policy (4) premiums are flexible, but the amount of the death benefit is fixed for the life of the policy

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

62 | Test Preparation Guide for LOMA 280

17. The following statements are about the level premium system. Select the answer choice that contains the correct statement. (1) Under a level premium system, the insurer uses premium dollars from the early policy years, plus the investment earnings, to help pay the increased number of death claims in the later years. (2) Insurers cannot increase the premium rate for a level premium policy based on an insured’s age, but they can increase the premium rate when the cost of providing benefits on a block of level premium policies increases. (3) The level premium system allows a person to purchase a series of one-year term life insurance policies and pay the same premium amount for every year of coverage rather than pay a premium that increases each year with the insured’s age. (4) As people insured under a block of level premium policies grow older, insurers increase the premium rate to have sufficient funds to pay the increasing number of death claims each year. 18. In the United States, Medicare is a federal government program that provides medical expense benefits to eligible individuals. One true statement about Medicare is that it (1) covers 100 percent of an enrollee’s medical expenses, without requiring a contribution from the enrollee (2) provides medical expense benefits only to individuals who have low incomes (3) provides medical expense benefits to persons age 65 and older and persons with certain disabilities (4) prohibits Medicare recipients from purchasing supplemental Medicare coverage 19. Teresa Fahey is covered by two group medical expense insurance policies. Each policy specifies a $250 calendar-year deductible and a 20 percent coinsurance requirement. Each plan contains a typical coordination of benefits (COB) provision that is not a nonduplication of benefits provision. Last year, Ms. Fahey incurred $10,000 in allowable medical expenses during a hospital stay. Those were her only medical expenses for the year. The plan designated as the primary plan paid the full benefit amount payable under the plan. In this situation, the benefit amount payable by the plan designated as the secondary plan is (1) (2) (3) (4)

$0 $2,200 $5,600 $7,800

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 63

20. The following paragraph contains two pairs of terms enclosed in parentheses. Determine which term in each pair correctly completes the paragraph. Then select the answer choice containing the two terms that you have chosen. A point-of-service (POS) plan is a managed care plan that allows plan members to choose, at the point of service, whether to seek medical care in-network or out-of-network. A POS plan’s level of coverage for services received from non-network providers is (lower than / the same as) the level of coverage for services received from in-network providers. Plan members generally must select a [third-party administrator (TPA) / primary care provider (PCP)] who is responsible for coordinating members’ medical care within the plan’s network of providers. (1) (2) (3) (4)

lower than / third-party administrator (TPA) lower than / primary care provider (PCP) the same as / third-party administrator (TPA) the same as / primary care provider (PCP)

21. Major medical expense insurance policies typically specify the services and treatments that are covered by the policy and those that are excluded from coverage. Major medical expense policies in the United States typically cover medical expenses that result from (1) treatment of an illness or injury that occurs while the insured is in military service or that results from an act of war (2) routine dental treatments and routine eye examinations (3) treatment that is paid for by other organizations (4) preventive services such as childhood immunizations and periodic screening and diagnostic tests 22. The Langdon Corporation provides its employees with a retirement savings plan that is funded entirely by cash contributions payable from Langdon’s profits. The amount of Langdon’s contributions varies from year to year, depending on company profits. Although the plan accumulates retirement assets on behalf of plan participants, it does not promise to provide monthly retirement income benefits. This information indicates that Langdon sponsors a type of retirement savings plan known, by definition, as a (1) (2) (3) (4)

savings plan stock bonus plan profit sharing plan Riester pension

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

64 | Test Preparation Guide for LOMA 280

23. The Fernbank Corporation purchased a group life insurance contract that contained a two-year contestable period. Four years after the contract was issued, Kenny Dowd, a new employee, filled out a medical questionnaire to be eligible for group coverage. He made material misrepresentations about his health on the questionnaire. Mr. Dowd died nine months after his coverage became effective, and the insurer discovered the material misrepresentations when Mr. Dowd’s beneficiary filed a claim for the death benefit. In this situation, the incontestability provision in the contract provides that the insurer (1) can contest the validity of Fernbank’s master group contract on the basis of Mr. Dowd’s material misrepresentations (2) can contest the validity of Mr. Dowd’s coverage on the basis of the material misrepresentations (3) cannot contest the validity of either the master group contract or Mr. Dowd’s coverage, because the contestable period had expired (4) cannot contest the validity of Mr. Dowd’s coverage, but it can adjust the amount of the death benefit payable to reflect Mr. Dowd’s true insurability at the time of application 24. Bernadette Russo was insured under the group life insurance plan provided by her employer, the Bainbridge Company. Bainbridge’s policy provided her with $125,000 of group term life insurance coverage, $125,000 of group accidental death and dismemberment (AD&D) insurance coverage, and $50,000 of business travel accident insurance coverage. Ms. Russo was insured under Bainbridge’s group policy when she died in an automobile accident while traveling on vacation. In this situation, the total amount of benefits payable to Ms. Russo’s beneficiary is (1) (2) (3) (4)

$125,000 $175,000 $250,000 $300,000

25. Sheila Donahue applied for an insurance policy on the life of her husband, Burt, and named their daughter, Naomi, as the beneficiary of the policy. The insurer’s underwriting guidelines regarding the presence of insurable interest in a third-party policy are the same guidelines that most insurers use. In this situation, before the insurer issues a policy, it most likely will require that an insurable interest in Burt’s life is present for (1) both Sheila and Naomi, and, according to laws in most jurisdictions, their relationship to Burt is sufficient to create an insurable interest in his life (2) both Sheila and Naomi, and, according to laws in most jurisdictions, their relationship to Burt is not sufficient to create an insurable interest in his life (3) Sheila only, and, according to laws in most jurisdictions, her relationship to Burt is sufficient to create an insurable interest in his life (4) Naomi only, and, according to laws in most jurisdictions, her relationship to Burt is not sufficient to create an insurable interest in his life

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 65

26. The four primary factors that affect the amount of an annuity’s periodic income payments are the amount of the principal invested, the accumulation period, the interest rate that represents investment earnings, and the number and timing of periodic income payments. With regard to the relationships among these factors, and assuming that all other factors remain unchanged, it is correct to say that increasing the accumulation period of an annuity contract generally results in (1) (2) (3) (4)

a decrease in the number of periodic income payments a decrease in the amount of investment earnings an increase in the stated interest rate an increase in the dollar amount of each periodic income payment

27. When Kayla Miller purchased a $500,000 term insurance policy on her life, she named her son Jeremy as the sole beneficiary of the policy and selected a settlement option whereby Jeremy would receive the policy proceeds in a series of monthly payments for 10 years. The amount of each monthly payment under this option depends on the amount of the policy proceeds, the interest rate applied to the proceeds, and the length of the payment period that Ms. Miller chose. This information indicates that the settlement option Ms. Miller chose for her policy is the (1) (2) (3) (4)

interest option life income option fixed amount option fixed period option

28. Colin Munro paid an initial premium of $2,500 when he applied for a $200,000 life insurance policy on his life. The insurer issued the policy with a typical two-year suicide exclusion period and a double indemnity accidental death benefit. Nine months after the policy was issued, Mr. Munro committed suicide by jumping off a bridge. At the time of his death, Mr. Munro had not made another premium payment. In this situation, the insurer most likely was liable to pay the policy beneficiary (1) (2) (3) (4)

$0 $2,500 $200,000 $400,000

29. Contracts between two parties can be classified as either bilateral or unilateral, depending on whether one or both parties make legally enforceable promises. Contracts can be further classified as bargaining contracts or contracts of adhesion, depending on whether both parties, as equals, set the terms and conditions of the contract or whether the contract is prepared by one party and accepted by the other party without any bargaining between the parties. With respect to these classifications of contracts, life insurance policies are classified as (1) (2) (3) (4)

bilateral bargaining contracts bilateral contracts of adhesion unilateral bargaining contracts unilateral contracts of adhesion

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

66 | Test Preparation Guide for LOMA 280

30. The specific wording of the entire contract provision in an individual life insurance policy varies according to whether the policy is an open contract or a closed contract. With respect to types of contracts and to the documents that constitute the entire contract, most individual life insurance policies are (1) open contracts, and the entire contract consists of the insurance policy, any attached riders, and the insurance company’s governing corporate documents (2) open contracts, and the entire contract consists of the insurance policy, any attached riders, and the attached copy of the insurance application (3) closed contracts, and the entire contract consists of the insurance policy, any attached riders, and the insurance company’s governing corporate documents (4) closed contracts, and the entire contract consists of the insurance policy, any attached riders, and the attached copy of the insurance application 31. When Paul LaRue purchased an insurance policy on his life, he stated on the application that his age was 35, when in fact he was then age 40. The policy contained a typical misstatement of age provision. Fifteen years after the policy was issued, Mr. LaRue died, and the policy beneficiary filed a claim for the policy proceeds. In processing the death claim, the insurer discovered the misstatement of age on Mr. LaRue’s policy application. The action that the insurer most likely would take in this situation is to (1) pay the full face amount stated in the policy without requiring any payment from the beneficiary (2) pay the face amount stated in the policy on the condition that the beneficiary first pay the difference between the amount of premiums actually paid and the amount of premiums that would have been payable by Mr. LaRue at age 40 (3) adjust the policy’s face amount to the amount the premiums actually paid would have purchased if Mr. LaRue’s age had been stated correctly on the application (4) deny the claim 32. A common supplemental benefit in individual life insurance policies is the waiver of premium for disability (WP) benefit. Under a WP benefit, the insurer waives its right to collect premiums that become due while the insured is totally disabled. One true statement about the WP benefit included in a cash value life insurance policy is that the (1) WP benefit is designed for third-party policies in which the policyowner is not the policy’s insured (2) cash value does not increase while the insurance company is waiving premiums (3) insurance company will waive the payment of premiums immediately upon receiving proof that an insured is totally disabled, without imposing a waiting period (4) insurance company actually pays the premiums that are waived under a WP benefit

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 67

33. The length of a whole life insurance policy’s premium payment period directly affects both the amount of the premium required for the policy and the pace at which the policy’s cash value builds. Compared to a limited-payment whole life policy with the same face amount, a continuous-premium whole life policy typically has a (lower / higher) annual premium and builds a cash value more (slowly / rapidly). (1) (2) (3) (4)

lower / slowly lower / rapidly higher / slowly higher / rapidly

34. The basic accounting equation for a stock insurance company consists of the insurer’s assets, liabilities, capital, and surplus. With respect to the capital and surplus components of the accounting equation, it is correct to say that a stock insurance company’s (1) capital represents the amount of money that the company’s owners invested in the company (2) capital represents the amount by which the company’s assets exceed its liabilities (3) surplus represents the amount of money the company earns from investing the funds it receives from customers (4) surplus represents the items of value that the company owns 35. Calvin Ludlow, age 40, purchased an annuity that will begin providing him with annual income payments when he is 50 years old. Mr. Ludlow is the annuitant of the contract. The annuity will provide payments for 15 years, regardless of whether Mr. Ludlow lives or dies during the period. The income payments will cease at the end of the 15-year period, even if Mr. Ludlow is still alive. One true statement about Mr. Ludlow’s annuity is that it (1) (2) (3) (4)

has a 10-year payout period has a 15-year annuity period is a deferred annuity is a life annuity with period certain

36. A Roth IRA (individual retirement arrangement) is one type of retirement savings plan that an individual can establish in the United States. With respect to the federal tax treatment of Roth IRAs, it is correct to say that (1) qualified withdrawals of a Roth IRA’s investment earnings are tax-free (2) there are no limits on the amount that an individual can contribute to a Roth IRA each year (3) the contributions that an individual makes to a Roth IRA are deductible from his current taxable income (4) investment earnings on a Roth IRA are taxable in the year in which they are earned

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

68 | Test Preparation Guide for LOMA 280

37. Sanjay Reddy was insured by a $200,000 term life insurance policy that included a double indemnity accidental death benefit rider with typical exclusions and limitations. Ten years after the policy was issued and while the policy was still in force, Mr. Reddy had a heart attack while standing at the corner of a busy street, waiting for the pedestrian sign to change. A moment later, he was struck by an automobile, but was not badly injured. Mr. Reddy was rushed to the hospital, where he died three days later of complications resulting from his heart attack. After the beneficiary submitted a claim for the policy proceeds, the insurer was able to confirm from eyewitnesses that Mr. Reddy had suffered the heart attack before he was struck by the automobile. In this situation, the total death benefit payable most likely was (1) (2) (3) (4)

$100,000 $200,000 $400,000 $600,000

38. The following statements are about risk characteristics that a group insurance underwriter considers when evaluating whether a group is an acceptable risk. Select the answer choice that contains the correct statement. (1) If young, new members are continually joining a group, the age distribution and loss rate of the group will be less stable than if the group did not add young, new members for a number of years. (2) In general, the larger the group, the more likely that the group will experience a loss rate that approximates the group’s predicted loss rate. (3) Regardless of the type of group that is being insured, group underwriting guidelines require the group policyholder to pay at least a portion of the group insurance premium. (4) Insurers impose more stringent underwriting requirements on employer-employee groups than on association groups because antiselection by individual group members is more likely to occur in employer-employee groups. 39. Fiona Beck purchased a whole life insurance policy that included a typical reinstatement provision and an incontestability provision with a two-year contestable period. Ms. Beck paid premiums for eight years and then allowed the policy to lapse. One year after the policy lapsed, Ms. Beck reinstated her policy by meeting the conditions specified in the reinstatement provision. With respect to the contestability of reinstated insurance policies, it is correct to say that Ms. Beck’s reinstated policy (1) is incontestable, because the contestable period specified in the original policy has expired (2) will never become incontestable, because the reinstated policy does not contain an incontestability provision (3) is contestable for two years from the date on which the policy was reinstated, but only on the basis of material misrepresentations made in her original application (4) is contestable for two years from the date on which the policy was reinstated, but only on the basis of material misrepresentations made in her reinstatement application

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 69

40. Todd Swenson was the policyowner of a $300,000 whole life insurance policy. The amount of his annual renewal premium was $1,200. When Mr. Swenson’s policy lapsed for nonpayment of a renewal premium, the policy’s reduced paid-up insurance nonforfeiture option went into effect. The policy’s net cash surrender value was $15,000 when the policy lapsed. In applying the nonforfeiture option in this situation, the insurer most likely (1) paid $15,000 in a lump sum to Mr. Swenson (2) automatically paid the overdue premium for Mr. Swenson by making a $1,200 loan against the policy’s cash value (3) applied $15,000 as a net single premium to purchase a whole life insurance policy with a face amount lower than $300,000 (4) applied $15,000 as a net single premium to purchase a $300,000 whole life insurance policy 41. Cassandra Hirsch is the policyowner-insured of a 10-year renewable term life insurance policy that includes a typical renewal provision. On the policy anniversary at the end of the 10-year term, the renewal provision most likely gives Ms. Hirsch the right to renew her policy for another 10-year term for (1) (2) (3) (4)

a smaller face amount than the original policy provided, at a lower premium rate the same face amount that the original policy provided, at the same premium rate the same face amount that the original policy provided, at a higher premium rate a larger face amount than the original policy provided, at a higher premium rate

42. One distinguishing characteristic of a universal life insurance policy is that the (1) policyowner is allowed to request an increase in the policy’s face amount after the policy has been in force for a specified period, but the policyowner cannot decrease the policy’s face amount (2) policy does not guarantee that interest will be paid on the policy’s cash value each year (3) policyowner is allowed to decide the amount he will pay for renewal premiums at the time he purchases the policy, but the renewal premium amount remains fixed for the life of the policy (4) mortality charge that the insurer deducts from the policy’s cash value increases each year as the insured ages 43. When an annuity contract owner withdraws money from the annuity, the insurer may charge a back-end sales charge, which is called a contingent deferred sales charge (CDSC) in a variable annuity. With respect to the form of this charge and whether the amount of the charge changes over time, it is correct to say that a back-end sales charge/CDSC is expressed as a (1) (2) (3) (4)

flat amount, and the amount of the charge typically decreases over time flat amount, and the amount of the charge typically remains the same over time percentage of the withdrawal, and the percentage typically decreases over time percentage of the withdrawal, and the percentage typically remains the same over time

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

70 | Test Preparation Guide for LOMA 280

44. Credit life insurance is available to cover borrowers and credit card holders for the amounts they owe on their loans and accounts. One characteristic of credit life insurance is that the (1) insurance policy generally provides protection for the insured’s lifetime, as long as the insured continues paying the premiums (2) lender pays the entire premium amount without any contributions from the borrowers who are covered by credit life insurance (3) policy benefit always is payable directly to the creditor if the insured borrower dies while the policy is in force (4) amount of life insurance coverage in force remains level over the duration of the loan, regardless of changes in the amount of the outstanding loan balance 45. During the financial design of a life insurance product, insurance companies multiply all of the potential benefits payable under the product by the expected probability that each benefit will be payable. The result of this calculation is the life insurance product’s (1) (2) (3) (4)

cost of benefits divisible surplus policy reserves accumulated value

46. The following statements are about the mortality tables that insurers use in the financial design of life insurance products. Select the answer choice that contains the correct statement. (1) Conservative values for specific life insurance product elements generally take the form of mortality rates that are lower than expected. (2) A mortality experience table is a mortality table that is compiled from an insurance company’s own records, reflecting its insureds’ actual mortality. (3) Most mortality tables are unisex tables that do not show separate mortality rates for males and females. (4) Mortality tables are not developed for use in a particular country because life expectancy and mortality rates do not vary significantly from one country to another. 47. The Jasper Life Insurance Company places proposed insureds into one of four risk classes: standard, preferred, substandard, and declined. An underwriter for Jasper determined that Morteza Samad, a proposed insured, presented a likelihood of loss that was neither significantly greater than average nor significantly lower than average. This information indicates that Jasper placed Mr. Samad in the risk class known as the (1) (2) (3) (4)

standard risk class preferred risk class substandard risk class declined risk class

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 71

48. The Zuni Investment Company was formed for the purpose of operating investment vehicles that pool the funds of investors and use the funds to buy a variety of stocks, bonds, and other securities. This information indicates that Zuni is the type of financial institution known as a (1) (2) (3) (4)

depository institution finance company fraternal benefit society mutual fund company

49. Lloyd Belanger, a United States resident, purchased an insurance policy on his life and named his wife, Carol, as the primary beneficiary. Several years later, Lloyd and Carol died in an automobile accident, and it was impossible to determine which of them died first. The state’s simultaneous death act governed how the insurer paid the policy proceeds. Assuming that Lloyd’s policy did not contain a provision that conflicted with the simultaneous death act, the policy proceeds were (1) (2) (3) (4)

payable as if Carol had outlived Lloyd payable as if Lloyd had outlived Carol payable as if Carol had not been involved in the accident not payable, because Lloyd and Carol died simultaneously

50. Abraham Kern is the policyowner-insured of a participating whole life insurance policy that specifies the premium reduction dividend option. Mr. Kern pays an annual premium of $1,500 for his coverage. Last year, the insurer declared a $300 dividend for Mr. Kern’s policy. Regarding the effect of this policy dividend, it is correct to say that (1) (2) (3) (4)

the face amount of Mr. Kern’s policy increased by $300 Mr. Kern had to pay only $1,200 toward the next annual renewal premium the insurer used the policy dividend to purchase one-year term insurance on Mr. Kern’s life the dividend was left on deposit with the insurer, because it was less than the amount of Mr. Kern’s annual premium

51. Vera Sund is the policyowner of a juvenile life insurance policy on the life of her 6-year-old daughter, Lily. Vera’s husband, Troy, is the primary beneficiary of the policy. Under the terms of the policy, when Lily reaches age 18, ownership and control of the policy will pass to her. The policy contains a typical waiver of premium for payor rider. Under the terms of this rider, the insurer will waive its right to collect the policy’s renewal premiums upon the death or total disability of (1) (2) (3) (4)

Vera, and the insurer will waive the premiums only until Lily reaches age 18 Vera, and the insurer will continue to waive the premiums even after Lily reaches age 18 Troy, and the insurer will waive the premiums only until Lily reaches age 18 Troy, and the insurer will continue to waive the premiums even after Lily reaches age 18

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

72 | Test Preparation Guide for LOMA 280

52. When Ben and Rachel Spano obtained a 30-year mortgage loan of $310,000 to purchase a home, they also purchased a $310,000 joint mortgage life insurance policy. Ben died 10 years after the policy was issued. The beneficiary designation in the policy was typical of that found in most joint mortgage policies. This information indicates that, upon Ben’s death, a policy benefit most likely was (1) (2) (3) (4)

payable to Rachel in an amount less than $310,000 payable to Rachel in an amount equal to $310,000 payable to the mortgage lender in an amount less than $310,000 not payable because a policy benefit is not payable until both Ben and Rachel have died

53. An insurer performed the following calculation to determine the annual premium amount for a $100,000 life insurance policy with a $5.00 premium rate: $5.00 × 100 = $500 The number 100 in this calculation represents the policy’s (1) (2) (3) (4)

coverage units actuarial assumptions indemnity benefits tabular mortality rates

54. When underwriters evaluate applications for individual health insurance, they consider several factors to determine the degree of morbidity risk that a proposed insured presents. Four primary factors are an individual’s sex, age, health, and work history. One true statement about these morbidity factors is that (1) males generally experience a higher morbidity rate than females of the same age (2) the average duration of illnesses generally decreases with age (3) an individual’s future health is strongly affected by her past and current illnesses and injuries (4) people with a history of steady employment generally represent a higher degree of morbidity risk than do people with a history of only temporary jobs or who have a number of gaps in their work record 55. Natalie Koch declined to participate in her employer’s group life insurance plan when she first became eligible for coverage in March. When she later decided to participate, she waited until November to enroll because eligible employees are allowed to join the plan during that month without providing evidence of insurability. The November period during which Ms. Koch can join her employer’s plan without providing evidence of insurability generally is known as (1) (2) (3) (4)

a probationary period an elimination period an eligibility period an open enrollment period

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

Sample Examination | 73

56. Most disability income policies use a two-part definition of total disability. The current usual definition of total disability states that, at the end of a specified period after the disability begins, usually two to five years, an insured is considered totally disabled only if the disability (1) (2) (3) (4)

is classified as a presumptive disability prevents him from performing the duties of any occupation prevents him from performing the essential duties of his own previous occupation prevents him from working at any occupation for which he is reasonably fitted by education, training, or experience

57. Consolidation, which is the combination of financial services institutions within or across sectors, has (decreased / increased) the number of traditional financial institutions within each sector of the financial services industry. Consolidation in the financial services industry occurs primarily through mergers and acquisitions. When two corporations are involved in a transaction known as (a merger / an acquisition), both corporations survive as separate legal entities after the transaction. (1) (2) (3) (4)

decreased / a merger decreased / an acquisition increased / a merger increased / an acquisition

58. The Willow Life Insurance Company has a reinsurance agreement with the Copley Insurance Company in which Willow transfers, and Copley accepts, part of the risk on insurance policies that Willow has issued. Willow’s role in this reinsurance agreement is that of a (1) (2) (3) (4)

reinsurer plan administrator direct writer financial holding company

59. Long-term care insurance policies contain requirements specifying the conditions that establish an insured’s eligibility to receive long-term care benefits. These requirements are known, by definition, as (1) (2) (3) (4)

benefit triggers attachment points class designations physical hazards

60. Madelyn Berg is developing a plan that considers the amount of assets and debts that she is likely to have when she dies and how best to preserve those assets so that they can be distributed as she desires. A will and life insurance coverage are important components of the plan. The type of plan Ms. Berg is developing is known, by definition, as (1) (2) (3) (4)

an estate plan a financial model a funding vehicle a survivorship life insurance plan END OF EXAMINATION

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

74 | Test Preparation Guide for LOMA 280

Answers to Sample Exam 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

J&S, c. 2, pp. 44, 45 ................................ 1 J&S, c. 1, pp. 21, 23, 26 .......................... 4 J&S, c. 3, pp. 50-51 ................................. 3 J&S, c. 6, p. 103 ...................................... 4 J&S, c. 9, p. 148 ...................................... 3 J&S, c. 9, pp. 147-148 ............................. 3 J&S, c. 11, p. 183 .................................... 4 J&S, c. 11, p. 184 .................................... 2 J&S, c. 12, pp. 194-196 ........................... 1 J&S, c. 14, p. 231 .................................... 4 J&S, c. 3, pp. 52-53 ................................. 2 J&S, c. 2, p. 40 ........................................ 4 J&S, c. 6, p. 89 ........................................ 3 J&S, c. 14, p. 222 .................................... 2 J&S, c. 7, pp. 114-115 ............................. 2 J&S, c. 6, p. 102 ...................................... 2 J&S, c. 4, pp. 69-70 ................................. 1 J&S, c. 13, p. 210 .................................... 3 J&S, c. 14, pp. 226-227 ........................... 2 J&S, c. 13, pp. 207-208 ........................... 2 J&S, c. 13, p. 204 .................................... 4 J&S, c. 12, p. 198 .................................... 3 J&S, c. 12, pp. 188-189 ........................... 2 J&S, c. 12, pp. 191-192 ........................... 3 J&S, c. 1, p. 33 ........................................ 1 J&S, c. 10, pp. 166, 167 .......................... 4 J&S, c. 9, p. 149 ...................................... 4 J&S, c. 8, p. 131; c. 7, p. 111 .................. 2 J&S, c. 3, pp. 55, 57 ................................ 4 J&S, c. 8, p. 119 ...................................... 4

Copyright © 2011 LL Global, Inc. All rights reserved. www.loma.org

31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60.

J&S, c. 8, pp. 125-126 ............................. 3 J&S, c. 7, pp. 107-108 ............................. 4 J&S, c. 6, pp. 92-93 ................................. 1 J&S, c. 2, p. 44 ........................................ 1 J&S, c. 10, p. 155 .................................... 3 J&S, c. 10, p. 168 .................................... 1 J&S, c. 7, pp. 110-111 ............................. 2 J&S, c. 11, pp. 178-180 ........................... 2 J&S, c. 8, p. 125 ...................................... 4 J&S, c. 8, p. 128 ...................................... 3 J&S, c. 5, pp. 83-84 ................................. 3 J&S, c. 6, p. 96 ........................................ 4 J&S, c. 10, p. 162 .................................... 3 J&S, c. 5, p. 81 ........................................ 3 J&S, c. 4, p. 62 ........................................ 1 J&S, c. 4, pp. 63, 68 ................................ 2 J&S, c. 1, p. 31 ........................................ 1 J&S, c. 2, p. 39 ........................................ 4 J&S, c. 9, pp. 145-146 ............................. 2 J&S, c. 9, p. 139 ...................................... 2 J&S, c. 7, pp. 108-109 ............................. 1 J&S, c. 5, pp. 80-81 ................................. 1 J&S, c. 4, pp. 68-69 ................................. 1 J&S, c. 14, p. 223 .................................... 3 J&S, c. 11, p. 177 .................................... 4 J&S, c. 13, pp. 211-212 ........................... 4 J&S, c. 2, p. 41 ........................................ 2 J&S, c. 1, p. 29 ........................................ 3 J&S, c. 13, p. 216 .................................... 1 J&S, c. 5, p. 74 ........................................ 1

280-TPGPDF-11 Test Preparation Guide for LOMA 280