CMFAS M9 (5th Edition – 2011) Mock Paper

1. A principal allows another person to appear as if he is his agent when in fact he

is not. This is an example of a/an _____________ authority.

A. usual
B. implied
C. express
D. apparent

2. The arrangement in which a policy owner transfers all his rights and ownership
of his policy to another person is known as _________ assignment.

A. absolute
B. statutory
C. collateral
D. conditional

3. Which one of the following statements describes the feature of Term Insurance?

A. It accumulates cash value.

B. There is an automatic premium loan.
C. It is issued only on a non-participating basis.
D. It contains savings and no investment element.

4. Which one of the following annuities pays the periodic benefits only for as long
as both of two designated annuitants are alive, and stops when both of them
have died?

A. Joint Life Annuity.

B. Single Life Annuity.
C. Multiple Life Annuity.
D. Joint and Survivor Annuity.

5. If the frequency of premium payment is to be changed from monthly to annually,

it can take effect only on the next ____________ date.

A. premium due
B. premium holiday
C. policy anniversary
D. policy servicing due

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6. Which one of the following persons has the contractual capacity to enter into a
contract under the Insurance Act (Cap. 142)?

A. Drunken person.
B. Minor aged 18 years.
C. Undischarged bankrupt.
D. Mentally disabled person.

7. Which one of the following personnel calculate the premiums of life insurance
policies?

A. Actuaries.
B. Adjusters.
C. Surveyors.
D. Risk Managers.

8. Which one of the following is the MOST relevant supporting document required
by the life insurer, in the event of a claim relating to unnatural death of the life
insured?

A. Coroner's report.
B. Physician's report.
C. Service certificate of death.
D. Statutory presumption of death.

9. The investment risk of an Investment-linked Life Insurance policy is borne entirely

by the:

A. trustee
B. life insurer
C. policy owner
D. fund manager

10. An investment-linked sub-fund with a basket of assets comprising an

apportionment of investments between equity and fixed income instruments
within a pre-determined range is called a _____________ fund.

A. bond
B. equity
C. property
D. balanced

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11. Which one of the following insurance BEST protects against the risk of
insufficient income arising out of outliving resources, or the risk of excessive
longevity?

A. Annuity.
B. Long-Term Care Insurance.
C. Disability Income Insurance.
D. Investment-linked Life Insurance.

12. Which one of the following structures of investment-linked sub-funds is the

investment income of these funds ploughed back into the funds, resulting in
enhanced unit prices?

A. Distribution structures.
B. Transaction structures.
C. Accumulation structures.
D. Diversification structures.

13. A witness to a Trust Nomination Form must be at least:

A. 18 years old
B. 21 years old
C. 18 years old and is one of the nominees under the Trust
D. 21 years old and is one of the nominees under the Trust

14. Besides Endowment Insurance policies and Whole Life Insurance policies, another
product that can be issued on a participating basis is the __________ policy.

A. Annuity
B. Group Life
C. Increasing Term Insurance
D. Personal Accident Insurance

15. _____________ is created when the principal or any person authorised by him
expressly appoints the agent by way of a deed, a written contract or orally.

A. Partnership
B. Implied agency
C. Express agency
D. Agency by necessity

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16. The suitability of an older person purchasing an Investment-linked Life Insurance

policy can be assessed through his protection needs, investment objectives, time
horizon and _________ profile.

A. risk
B. health
C. portfolio
D. investment

17. Which one of the following statements regarding Participating Life Insurance
policies is TRUE?

They are also known as ___________ policies.

A. with-profits
B. with-returns
C. with-interests
D. with-revenue

18. Which one of the following is subject to income tax?

A. Lottery wins.
B. War Pensions.
C. Gains from trade.
D. Bank deposit interest.

19. It is stated under the Insurance Act (Cap.142) that the types of policies eligible
for nomination are any life policy or accident and health policy which:

A. provides death benefits

B. is governed by Singapore law
C. is issued by a registered insurer
D. is all of the above

20. If the proposed life insured goes diving frequently, the underwriter may require
him to complete a/an __________ questionnaire.

A. medical
B. financial
C. risk tolerance
D. occupation and pastime

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21. Which one of the following statements regarding Endowment Insurance policies
is TRUE?

A. Cash value builds up slowly.

B. Only regular premiums are allowed.
C. Premium decreases as cover continues.
D. They are suitable for providing children's education.

22. A Joint Mortgage Decreasing Term Insurance is usually issued as a collateral

security for a housing loan granted by a bank, and payable on the death of one
of the lives insured. This is typically issued as a _________ policy.

A. Group Life Insurance

B. First-to-die Life Insurance
C. Long-Term Care Insurance
D. Second-to-die Life Insurance

23. Which one of the following statements about the feature of an Endowment
Insurance policy is TRUE?

A. Riders cannot be attached to the policy.

B. It cannot be issued on a participating policy.
C. Premium is usually level throughout the policy term.
D. The sum assured can be paid out only in instalments.

24. Before year 2013, the Central Provident Fund (CPF) Board would allow its
members at the age of 55 years, to withdraw their CPF Minimum Sum in their
Retirement Account to purchase __________ annuities.

A. deferred
B. temporary
C. immediate
D. drawdown

25. A fund which was started at an earlier point in time, and into which subsequent
investment-linked sub-funds tap, is called a ___________ fund.

A. mirror
B. feeder
C. mother
D. portfolio

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26. For a pure risk to be potentially insurable, the loss must be:

A. definite
B. incalculable
C. insignificant
D. catastrophic to the insurer

27. A/An __________ bonus is usually given to participating policies terminating in the
early part of the year, before the finalisation of the bonus allocation.

A. Cash
B. Interim
C. Simple Reversionary
D. Compound Reversionary

28. Which one of the following policies provides death benefits for a specific period
of time?

A. Annuity policy.
B. Term Insurance policy.
C. Ordinary Whole Life Insurance policy.
D. Limited Premium Payment Whole Life Insurance policy.

29. A CPF member can use his CPF savings to purchase an Investment-linked Life
Insurance policy under the CPF Investment Scheme, but since 1 January 2001,
the only type of premium allowed is a ________ premium.

A. yearly
B. single
C. regular
D. limited

30. Which one of the following rights that agents have in respect of their relationship
with their principal is at common law?

A. Right to confidential information.

B. Right to termination and right to ratification.
C. Right to remuneration and right to indemnity.
D. Right to apparent authority and right to implied authority.

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31. If the individual taxpayer uses cash to top up the CPF Minimum Sum for his own
account AND that of his handicapped sibling, he can claim tax relief up to a
maximum of:

A. S$12,000
B. S$13,000
C. S$14,000
D. S$15,000

32. According to Section 60(2) of the Insurance Act (Cap.142), a Life Insurance
policy shall not automatically lapse or be forfeited by reason of the non-payment
of premiums, if it has been in force for a minimum period of ________ years.

A. two
B. three
C. four
D. five

33. The cash value of a Whole Life Insurance policy usually builds up after the policy
has been in force for at least _____ year(s).

A. one
B. three
C. five
D. seven

34. Which of the following riders will give the insured the right to purchase additional
amounts of insurance at specified intervals, without evidence of suitability?

A. Payor Benefit Rider.

B. Accelerated Death Benefit Rider.
C. Guaranteed Insurability Option Rider.
D. All of the above riders.

35. The jurisdiction of the Financial Industry Disputes Resolution Centre (FIDReC) in
adjudicating disputes between insureds and insurance companies is for claims of
up to __________ per claim.

A. S$80,000
B. S$100,000
C. S$120,000
D. S$140,000

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36. Which one of the following riders will increase the benefit payable on death?

A. Term Rider.
B. Critical Illness Rider.
C. Waiver of Premium Rider.
D. Total and Permanent Disability (TPD) Rider.

37. Which one of the following statements is TRUE when the life insurance agent is
acting as an agent of the insured?

The life insurance agent may:

A. issue a cover note

B. advise on the insurance cover required
C. advise on the quantum of the claim payable
D. sign a proposal form on behalf of the insured

38. The first requirement of a contract is the intention of all the parties to enter into
a __________ relationship.

A. valid
B. legal
C. friendly
D. non-binding

39. Which one of the following factors is an important consideration in underwriting,

to determine if the policy owner can keep the policy in force once it is issued by
the insurer?

A. Lifestyle.
B. Medical history.
C. Physical condition.
D. Financial condition.

40. A Key-Person Insurance policy is usually a/an ______________ Term Insurance

policy.

A. Level
B. Increasing
C. Decreasing
D. Supplementary

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41. Most sub-fund switches allowed under Investment-linked Life Insurance policies
are done on a _________ basis.

A. bid-to-bid
B. bid-to-offer
C. offer-to-bid
D. offer-to-offer

42. The rate which is primarily used to determine the premiums for Health Insurance
is the ______________ rate.

A. mobility
B. mortality
C. morbidity
D. modernity

43. Which one of the following documents provides the life insurer with the primary
source of information about the risk to be insured?

A. Claim form.
B. Cover note.
C. Proposal form.
D. Health declaration.

44. Which one of the following is NOT a common law duty of an agent?

A. Carry out his mandate.

B. Delegate his authority.
C. Exercise due care and skill.
D. Act with integrity and honesty.

45. To ensure that the insurance contract is not an illegal wagering agreement,
which one of the following insurance principles needs to be present?

A. Indemnity.
B. Subrogation.
C. Insurable interest.
D. Utmost good faith.

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46. If there is a __________ Rider attached to a juvenile policy, all future premiums up
to a certain specified age of the child will be waived upon the policy owner's
death or total and permanent disablement.

A. Payor Benefit
B. Waiver of Premium
C. Family Income Benefit
D. Guaranteed Insurability Option

47. Although bonus declaration is not guaranteed, life insurers generally try to avoid
large fluctuations in the bonus declared from year to year by __________ bonuses
over time.

A. analysing
B. averaging
C. smoothing
D. computing

48. A policy that shares in the insurance company's profits or surplus in a particular
fund is known as a/an __________ policy.

A. permanent
B. participating
C. non-participating
D. Investment-linked

49. Which one of the following statements about an Acceleration Benefit Critical
Illness rider is TRUE?

A. It will terminate once a valid claim is made.

B. Its sum assured can be claimed more than once.
C. Its sum assured is a certain multiple of that of the basic policy.
D. It cannot be attached to an Investment-linked Life Insurance policy.

50. A trust is usually a written agreement made between the trustee and the
__________ governing the protection of assets.

A. bailor
B. settlor
C. assignor
D. nominee

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51. Which one of the following bonuses is paid in the form of an addition to the sum
assured irrespective of the age of the insured, the time of any claim, or the
period that the policy has been in force?

A. Cash bonus.
B. Interim bonus.
C. Terminal bonus.
D. Reversionary bonus.

52. One type of bonus which the life insurer pays to a participating policy that has
been kept in force until maturity or death is the ___________ bonus.

A. cash
B. interim
C. terminal
D. reversionary

53. Bonuses of participating policies are declared on an annual basis and are usually
expressed in the form of an addition to the:

A. premium
B. sum assured
C. paid-up value
D. surrender value

54. A __________ contract is one that is enforceable at law and meets all the normal
contractual requirements.

A. valid
B. valuable
C. voidable
D. valuation

55. If the claimant is other than the policy owner, the life insurer will usually require
the __________ to be submitted, before settling a maturity claim of an
Endowment policy.

A. police report
B. deed of assignment
C. physician's statement
D. original copy of hospital bill

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56. Which one of the policies provides for payment of the face value, only when the
life insured survives until the end of a specified period?

A. Whole Life Insurance policy.

B. Endowment Insurance policy.
C. Universal Life Insurance policy.
D. Critical Illness Insurance policy.

57. The insurer has the right to cancel the policy and at the same time claim
damages, where there is ___________ by the insured.

A. any non-disclosure
B. innocent misrepresentation
C. negligent misrepresentation
D. fraudulent misrepresentation

58. Which one of the following will NOT be considered a breach of fiduciary duty by
an agent?

A. Informing the principal of material facts.

B. Accepting any bribes or secret commission.
C. Taking advantage of his position to gain benefits for himself.
D. Putting himself in a situation that conflicts with his own interest.

59. Which one of the following receipts is usually issued by the adviser on behalf of
the insurer to acknowledge the proposer’s first premium payment by cash or
cheque with the proposal form?

A. Official receipt.
B. Permanent receipt.
C. Intermediary receipt.
D. Conditional premium deposit receipt.

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60. A promotional material statement describing the investment strategy of an

investment-linked sub-fund reads: "The objective of this fund is to maximise
returns consistent with a portfolio of 60% equities and 40% corporate bonds,
and is expected to outperform the fixed deposit savings rate in the medium to
long term." The sub-fund is a typical example of a ______________ fund.

A. cash
B. property
C. managed
D. capital guaranteed

61. A Life Insurance policy that is assigned without any valuable consideration being
involved is considered an assignment by:

A. way of gift
B. paper value
C. operation of law
D. contractual obligation

62. Riders are special policy ____________ that provide supplementary benefits which
are not found in the basic policy.

A. provisions
B. conditions
C. limitations
D. exclusions

63. Which one of the following documents that the claimant must obtain from the
Court if the policy owner who is the life insured dies leaving a Will?

A. Grant of probate.
B. Statutory declaration.
C. Letter of administration.
D. Estate duty clearance certificate.

64. A form of "interest sensitive" insurance with a guaranteed minimum interest

crediting rate is __________ Insurance.

A. Level Term
B. Universal Life
C. Pure Endowment
D. Investment-linked Life

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65. The level of non-guaranteed bonuses of participating Life Insurance policies is

dependent on the value of the assets backing them, which in turn depends
mainly on investment returns, expenses and:

A. inflation
B. premium rates
C. claim payments
D. exchange rates

66. Life Insurance companies generally establish and maintain separate Life Insurance
funds for participating policies, non-participating policies and _____________
policies.

A. Annuity
B. Group Life Insurance
C. Universal Life Insurance
D. Investment-linked Life Insurance

67. The proper claimants under Section 61(12) of the Insurance Act (Cap.142),
include the deceased's spouse, child, parent, sibling and:

A. uncle
B. nephew
C. grandchild
D. grandparent

68. Insurance plays an important function in acting as a risk __________ mechanism.

A. control
B. transfer
C. retention
D. avoidance

69. The technique used to protect an Investment-linked policy owner from the risk of
severe price decline of any one stock is called:

A. flexibility
B. diversification
C. fund management
D. dollar cost averaging

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70. The income tax payable by an individual taxpayer is based on his __________
income.

A. earned
B. statutory
C. assessable
D. chargeable

71. Besides the basic plan applied for and the age of the proposed life insured, which
one of the following is the MOST important factor that will determine whether he
will be required to undergo a medical examination?

A. Policy term.
B. Sum assured.
C. Attaching Rider.
D. Premium frequency.

72. The bid-offer spread, which is typically a 5% difference between the bid and
offer prices levied, when the Investment-linked Life Insurance policy owner
purchases a unit in the sub-fund, is also known as the:

A. back-end loading
B. premium holiday
C. initial sales charge
D. underlying expense

73. Which one of the following premium payment policies will usually lead to the
premium increasing at each policy renewal because of the life insured's
advancing age?

A. Single premium policy.

B. Regular premium policy.
C. Limited premium payment policy.
D. Yearly renewable premium policy.

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74. The Intestate Succession Act (Cap.146) spells out the rules for distributing the
property of the deceased person without a Will to the spouse, children, parents,
siblings and their children, grandparents and:

A. parents-in-law
B. fiancé or fiancée
C. uncles and aunts
D. grandparents-in-law

75. The consideration for the promise by the policy owner to forgo all rights under a
Life Insurance policy is the:

A. cash dividend
B. maturity value
C. surrender value
D. premium payment

76. Under the terms of a typical Waiver of Premium Rider, total and permanent
disability does NOT include total and irrecoverable loss by physical severance of:

A. both feet
B. both hands
C. all fingers of one hand
D. one foot and one hand

77. Which one of the following statements regarding the benefit of annuities is
FALSE?

A. They provide guaranteed income.

B. They are purchased for death benefits.
C. Investment returns earned during the accumulation period are tax-free.
D. Capital may be guaranteed depending on the type of annuity purchased.

78. Which one of the following is NOT a payment method for a regular annual
premium due under an ordinary Life Insurance policy?

A. By banker's order.
B. By GIRO deduction.
C. Using CPF savings.
D. By cash or cheque payment.

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79. The policy owner wishes to surrender his participating Life Insurance policy.
Which one of the following alternatives is NOT available to him?

A. Apply for a policy loan.

B. Surrender only the bonuses for cash.
C. Change the premium payment mode.
D. Accelerate the payment of future bonuses.

80. Which one of the following documents will NOT usually be required by the
insurer when a policy owner makes a critical illness claim under the policy?

A. Police report.
B. Medical report.
C. Claimant's statement.
D. Attending physician's statement.

81. Which one of the following statements about an Investment-linked Life Insurance
policy is FALSE?

A. Disclosure under the policy is more transparent.

B. The policy owner bears the full investment risk.
C. There is a guaranteed minimum surrender value.
D. The unit value fluctuates with the value of the underlying assets.

82. Which one of the following documents is NOT required to be given to the
prospective clients before they purchase an Investment-linked policy?

A. Profile Statement.
B. Benefit Illustration.
C. Product Summary.
D. “Your Guide to Life Insurance”.

83. Insurable interest is NOT present when:

A. individuals insure on their own lives

B. husbands insure on the lives of their wives
C. employers insure on the lives of their employees
D. godparents insure on the lives of their godchildren

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84. Under the new Nomination Framework, for which one of the following types of
policies is revocable nomination NOT allowed?

A. A cash-funded Life policy.

B. A CPF Dependants’ Protection Scheme (DPS) policy.
C. A life policy bought under the CPF Investment Scheme (CPFIS).
D. An Annuity bought under the CPF Minimum Sum Scheme (CPF MSS).

85. Under a trust nomination, the written consent of the nominees is NOT required
before a policy owner can:

A. surrender the policy

B. take a loan under the policy
C. make any change to the policy
D. pay the premium by cash instead of cheque

86. Which one of the following statements regarding the original age convertible
option included in convertible Term Insurance policy is TRUE?

A. It is a more common option than attained age conversion option.

B. It requires the policy owner to make a large cash outlay at the time of
conversion.

C. Under this option, the permanent insurance coverage is treated as if it had

been in effect since the effective date of the convertible Term Insurance
policy.

D. When term insurance cover is converted to permanent insurance, the

renewal premium rate will be based on the insured's age when the
coverage is converted.

87. Which one of the following documents is NOT a typical requirement of the life
insurer if the policy owner decides to surrender his policy for cash value?

A. Deed poll.
B. Policy contract.
C. Discharge voucher.
D. Deed of assignment if prior notice was previously lodged.

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88. As a participating Endowment Insurance policy will acquire cash value after a
certain number of years, which one of the following is NOT a privilege to the
policy owner?

A. Policy loan.
B. Fund switching.
C. Non-forfeiture option.
D. Automatic premium loan.

89. Under the non-forfeiture option, the built-up cash value in a Whole Life Insurance
policy CANNOT be:

A. surrendered for cash

B. used to purchase paid-up insurance
C. used to purchase extended term insurance
D. exchanged for a new policy with a similar sum assured

90. The policy owner of which one of the following insurance policies CANNOT make
any insurance nomination?

A. Term Insurance policy.

B. Group Life Insurance policy.
C. Whole Life Insurance policy.
D. Endowment Insurance policy.

91. During the sales process, a life insurer's representative need NOT give to his
client a copy of the:

A. Benefit Illustration
B. Product Summary
C. Internal Governance Policy
D. "Your Guide To Life Insurance"

92. Which one of the following is NOT usually a requirement for the issuance of a
duplicate policy?

A. The payment of the cost of duplication.

B. Self-addressed envelope with postage paid.
C. A written request stating the circumstances of the loss.
D. A copy of the police report if the policy has been stolen.

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93. Which one of the following statements regarding the features of a Group Term
Life Insurance policy is FALSE?

A. Riders can be attached.

B. Assignment of policy to a third-party is allowed.
C. Coverage stops after the employee has resigned from the organisation.
D. Coverage starts when the employee starts work or upon his confirmation.

94. Important Note:

All preliminary calculations should be correct to two decimal places (with
rounding) and the final answer correct to the nearest unit (with rounding).

Karen wants to top up her Investment-linked Life Insurance policy. The fees and
charges are paid for by cancelling units. Based on the information given below,
calculate how much must her top-up amount be, in order for her to acquire an
additional 1,000 units after deduction of charges?

Bid price: S$2.30

Bid-offer spread: 5%
Administration fee and other charges: S$109.25

A. S$2,415
B. S$2,505
C. S$2,520
D. S$2,535

95. Important Note:

All preliminary calculations should be correct to two decimal places (with
rounding) and the final answer correct to the nearest unit (with rounding).

Calculate the return on gross premium at the end of five years for a single
premium Investment-linked Life Insurance policy purchased, based on the
information given below.

Single premium = S$30,000

Bid price at inception = S$1.50
Bid-offer spread = 3% throughout
Growth rate of unit values = 6% per annum (p.a.)
Number of units remaining in the policy = 19,104.84

A. 5% p.a.
B. 6% p.a.
C. 7% p.a.
D. 8% p.a.

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96. Important Note:

All preliminary calculations should be correct to two decimal places (with
rounding) and the final answer correct to the nearest unit (with rounding).

Joseph has a regular premium Investment-linked Life Insurance policy. He is now

paying the annual premium of S$1,000. Charges are applied after units have
been purchased. By how many units will his total units increase, after the
premium is paid and charges have been deducted?

Offer price : S$2.11

Bid-offer spread : 5%
Allocation rate : 80%
Policy fee and other charges : S$63

A. 344 units.
B. 348 units.
C. 354 units.
D. 442 units.

97. Important Note:

All preliminary calculations should be correct to two decimal places (with
rounding) and the final answer correct to the nearest unit (with rounding).

Barry has a monthly premium Investment-linked Life Insurance policy (ILP). Under
this ILP, the policy fee and mortality charge are paid for by cancelling units.
Based on the information given below, how many units will be cancelled?

Monthly policy fee: S$8

Mortality charge for the month: S$22.69
Bid price of units: S$1.55
Bid-offer spread: 3%

A. 15 units.
B. 18 units.
C. 20 units.
D. 22 units.

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98. Important Note:

All preliminary calculations should be correct to two decimal places (with
rounding) and the final answer correct to the nearest unit (with rounding).

Under an Investment-linked Life Insurance policy (ILP), the death benefit payable
is the higher of the value of units or the sum assured. Samantha's ILP has
27,027 units and the sum assured is S$50,000.

Offer price: S$1.91

Bid-offer spread: 5%

What would be the death benefit payable if she were to die?

A. S$48,919
B. S$50,000
C. S$51,622
D. S$54,324

99. Premium __________ is a period when the policy owner does not pay any
premium and yet enjoys the benefits as defined in his Investment-linked Life
Insurance policy.

A. lapse
B. hedge
C. holiday
D. protection

100. Mary would like to purchase a life insurance policy with the following features:

(i) It covers her for life;

(ii) It has a Total and Permanent Disability (TPD) benefit

attached as part of the basic policy; and

(iii) It provides her with bonuses in addition to the sum assured.

Which one of the following life insurance policies should Mary purchase?

A. Term Insurance.
B. Universal Life Insurance.
C. Participating Whole Life Insurance.
D. Participating Endowment Insurance.

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Answers to Mock Paper

1 D 26 A 51 D 76 C
2 A 27 B 52 C 77 B
3 C 28 B 53 B 78 C
4 D 29 B 54 A 79 D
5 C 30 C 55 B 80 A
6 B 31 C 56 B 81 C
7 A 32 B 57 D 82 A
8 A 33 B 58 A 83 D
9 C 34 C 59 D 84 D
10 D 35 B 60 C 85 D
11 A 36 A 61 A 86 C
12 C 37 B 62 A 87 A
13 B 38 B 63 A 88 B
14 A 39 D 64 B 89 D
15 C 40 A 65 C 90 B
16 A 41 A 66 D 91 C
17 A 42 C 67 B 92 B
18 C 43 C 68 B 93 B
19 D 44 B 69 B 94 D
20 D 45 C 70 D 95 A
21 D 46 A 71 B 96 B
22 B 47 C 72 C 97 C
23 C 48 B 73 D 98 B
24 A 49 A 74 C 99 C
25 C 50 B 75 C 100 C

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