FINANCE 390 FINANCE 341 Sample Final Exam with answers UPDATED 2022-2023 VERIFIED

Chapter 1: Introduction to Life Insurance
1. All of the following are advantages of life insurance except:
a. Guaranteed payout
b. Proceeds not probated c. Cost of coverage reduces disposable income
d. Generally not subject to federal income tax
2. Which of the following is not a standard provision in a typical life insurance policy?
a. a provision explaining the insured’s right to assign the policy b. a provision permitting the insurer to cancel the policy at any time if the insured individual changes jobs
c. a provision describing alternative settlement options that may be elected for payment of death proceeds
d. a provision explaining the policyowner’s right to borrow cash values
3. The three principle factors in premium calculations are:
a. agent commissions, mortality, and expense ratios
b. agent commissions, interest rates, and lapse rates c. interest rates, agent commissions, and mortality
d. interest rates, morbidity, and company dividends
4. Insurance companies base their mortality assumptions on: a. the experience of large groups of people
b. published mortality results of other large life insurance companies
c. federally mandated mortality tables published by the Treasury Department
d. the individual assumptions made by actuaries employed by the company
Chapter 2: How to Estimate the Insurance Need
1. All of the following are primary life insurance planning areas, except:
a. income replacement and family needs b. portfolio value and allocation of assets between debt and equity instruments
c. business insurance needs analysis
d. estate preservation and liquidity needs FINANCE 390 FINANCE 341 Sample Final
Exam with answers 2022/2023.
2. The “multiples-of-salary” method of estimating the amount of a family’s insurance needs is
a. a rule of thumb method that determines insurance need by looking at the number of children in the family
b. a method that was repealed by the Taxpayer Relief Act of 1997 c. a method combining a simple rule of thumb method with elements of income replacement and needs analysis
d. a method that can be used only by individuals who are properly licensed with the FAA
3. The income replacement approach to determining a family’s insurance needs is based primarily on?
a. the earnings growth rate of long-term U.S. Treasury securities
b. regulations issued by the Department of Health and Human Services
c. the current balance in the accumulated adjustment account d. the human life value concept
4. A conceptually sound approach to valuing key employees should
a. Ignore the financial consequences of the timing of lost employee contributions
b. Discount for trends in employee contributions c. Recognize that most, if not all, the value of key employe contributions will be recovered over time through change or adapting
Chapter 3: How to Determine the Right Company
1. The most important factors that should be considered in choosing an insurance company include all of the following, except: a. the quality of the company’s policy illustrations
b. the company’s financial stability
c. the company’s reputation for service and fairness to policyholders
d. the availability of products that meet the needs of the customer
2. Which of the following items should not be taken into account when performing a “due care” analysis?
a. assessing the general characteristics and financial information of the company
b. reviewing profitability, leverage and liquidity tests
c. looking at the company’s ratings by the major rating services d. inspecting the company’s marketing materials