PRINCIPLES OF RISK MANAGEMENT AND

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PRINCIPLES OF RISK MANAGEMENT AND

INSURANCE EXAM UPDATED 2025

COMPLETE EXAM| 200 ACTUAL EXAM

QUESTIONS WITH CORRECT DETAILED

ANSWERS (VERIFIED ANSWERS ) ALREADY

GRADED A+

The human life value is defined as the - ANSWER - present value of the family's share of a deceased breadwinner's future earnings

Bill is attempting to determine how much life insurance to purchase. He has two dependent children and his wife does not work outside of the home. An advisor suggested that Bill should consider Social Security benefits when doing his life insurance planning. One concern in this regard is the period after Social Security benefits to a widow terminate until they resume again. This period is called the... - ANSWER - blackout period

When using the needs approach, several "special needs" should be considered. One special need is money to cover unexpected events, such as major car repairs, dental bills, or home repairs. Money set aside for this purpose is called a(n)... - ANSWER - emergency fund

Most family heads need substantial amounts of life insurance. However, with limited income, money spent on life insurance reduces the amount of discretionary income available for other high-priority needs. What an insured person gives up when he or she purchases life insurance instead 1 / 4

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pg. 2 of using the premium dollars for other purposes is called the... - ANSWER - opportunity cost of buying life insurance

Which of the following statements about yearly renewable term insurance is (are) true?

• it requires evidence of insurability for renewal
• it is most appropriate when an insured needs lifetime protection -

ANSWER - neither 1 or 2

What happens to the premiums for yearly renewable term insurance as an insured gets older? - ANSWER - they increase at an increasing rate

Which of the following statements about term insurance is true? - ANSWER - most policies can be renewed for additional periods without evidence of insurability

Which of the following statements about a decreasing term insurance policy is true? - ANSWER - the face amount of the policy decreases during the policy period, but the premium remains level

The purchase of term insurance is justified by which of the following circumstances?

• the insured wants to save money through the policy for a specific

need

• the insured has a temporary need for life insurance protection -

ANSWER - only 2 2 / 4

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pg. 3 A legal reserve in life insurance is a result of... - ANSWER - excess premiums in the early policy years being invested at compound interest

The net amount at risk for an ordinary life insurance policy is the difference between the... - ANSWER - face amount of the policy and the legal reserve

Which of the following statements about life insurance cash values is (are) true?

• Cash values are a result of the level premium method of purchasing

life insurance.

• The cash value of a policy must always exceed the policy's legal

reserve. - ANSWER - only 1

Disadvantages of life insurance settlement options include which of the following?

• Higher yields can often be obtained elsewhere.
• Life income options have limited usefulness at younger ages. -

ANSWER - both 1 and 2

Which of the following statements about the waiver-of-premium provision in life insurance is true? - ANSWER - the disability must occur before a stated age, such as 65, for premiums to be waived

Which of the following statements about the guaranteed purchase option is true? - ANSWER - the additional coverage can be purchased without demonstrating insurability 3 / 4

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pg. 4 Which of the following statements about the guaranteed purchase option is true? - ANSWER - the options permit the insured to purchase specified amounts of life insurance in the future even if the insured has become uninsurable

Which of the following statements about a typical accidental death benefit rider is (are) true?

• Accidental injury must be the cause of death for the increased benefit

to be paid.

• The accidental death must occur prior to some specified age for the

increased benefit to be paid. - ANSWER - both 1 and 2

Reasons for NOT purchasing an accidental death benefit rider include which of the following?

• Most people die as a result of a disease rather than from an accident.
• The economic value of a human life is not increased if death occurs

because of an accident. - ANSWER - both 1 and 2

The cost-of-living rider typically bases increases in the policy face value on changes in the... - ANSWER - consumer price index

Which of the following statements about accelerated death benefits riders is (are) true?

• The benefit paid is usually less than the full-face amount.
• Several different medical conditions may trigger the payment of

benefits. - ANSWER - both 1 and 2

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