Mock Exam Set 4

1. What is the meaning of caveat emptor?

A. Buyer beware
B. Utmost good faith
C. Duty of disclosure
D. Both parties are in total agreement

2. Which of the following is not a method of indemnity?
A. Refund
B. Repair
C. Replacement
D. Reinstatement

3. What is a Proximate Cause?
A. Can be exercised by the insurer even before the insured is indemnified
B. The policy must cover a common peril which gives rise to the loss
C. Its a cause which is expressly covered by a policy
D. The cause of loss amongst many causes of losses which can be taken to be the
dominant cause of loss

4. Medical and Health insurance is designed _______________
A. to ease the financial burden caused by adverse changes in medical
B. to ease the financial burden caused by adverse changes in health
C. to ease the financial and emotional burden caused by adverse changes in life
D. to ease the financial and emotional burden caused by adverse changes in health

5. Which insurance does not need the consent of the insurer for assignment?
A. Fire Policy
B. Life Policy
C. Motor Policy
D. None of the above

6. When an agent performs an act that is not within his actual authority, but which later
becomes binding on the principal because the principal agrees to accept the act as having
been done on his behalf. This is an act of ?
A. ratification
B. clarification
C. authorization
D. certification

7. Utmost Good Faith should be practiced by insured or insurer?
A. Insured
B. Insurer
C. Insured & Insurer
D. None of them

8. When is a policy contract enforceable?
A. Upon receipt of policy contract by the policy holder
B. Upon payment of first premium
C. Upon issuance of the policy contract
D. Upon submission of proposal

9. A life assured passed away during the grace period, before the next premium is paid, what is
the compensation?
A. Full Sum Assured
B. Premiums paid
C. Cash Dividends
D. Nothing
Compiled by FSA
As at April 2008
Mock Exam Set 4
10. A term policy can be converted into .
A. Permanent insurance
B. Endowment insurance
C. Whole life insurance
D. Not convertible

11. How long is the grace period for a policy?
A. 30 days
B. 60 days
C. 90 days
D. 45 days

12. An order pronouncing a statutory presumption of death in case of person who has gone
missing for more than years.
A. 10
B. 9
C. 7
D. 8

13. Gambling is an example of:
A. Speculative Risk
B. Pure Risk
C. Fundamental Risk
D. Particular Risk

14. An insurance policy only covers the following risks except?
A. Personal Risk
B. Pure Risk
C. Fundamental Risk
D. Particular Risk

15. X has an investment of RM40,000 for 10 years in a high risk investment vehicle. He also has
a life policy with a yearly premium of RM3,200 and he does not contribute to EPF. What is
his total tax exemption amount?
A. RM3,200
B. RM7,200
C. RM4,000
D. RM43,200

16. Which of the following states the description below:
He/she totally transfers the policy ownership to the assignee at the time of assignment.
Assignor surrenders all his/her rights of the policy to assignee.
A. Conditional Assignment
B. Nomination
C. Absolute Assignment
D. Transfer

17. What is loss?
A. Uncertainty about financial loss from an exposure
B. A reduction or disappearance of economic value
C. A cause of perils
D. A condition that increases the chance of loss
Compiled by FSA
As at April 2008
Mock Exam Set 4
Compiled by FSA
As at April 2008
18. Which of the following are major types of hazard?
I. Physical Hazard
II. Moral Hazard
III. Occupational Hazard

A. I & II
B. II & III
C. I, II & III
D. I & III

19. How many days can a policy be back dated?
A. 3 months
B. 6 months
C. 12 months
D. 1 month

20. Which of the following is false about insurance?
A. Subrogation is considered as a corollary of indemnity
B. The arrangement works on the law of large numbers, by spreading the risk of loss faced
by a specific person or enterprise to all parties who pool their resources to pay for
individual losses
C. Insurance, as an organization, seeks to provide protection against financial loss caused
by fortuitous events
D. Life insurance can be defined as a contract which pays an agreed sum of money on the
happening of a contingency (event), or of a variety of contingencies, dependent on
human life

21. For marine insurance contracts, insurable interest must exist________.
A. at the beginning only
B. at the time of loss
C. at the beginning and at time of loss
D. at any time

22. Which of the following is true?
A. LIAM is the representative body of the Life Insurance Companies operating in Malaysia.
B. PIAM is an association for life insurance agents and their supervisors in Malaysia
C. FPAM is a non profit organization which was founded by a group of individual
professionals from various sectors of various industry
D. AMLA serves the industry as a non profit professional body

23. This department generally concentrates its efforts on identification of field officers, recruiting,
agents contract, motivating and supervising the sales force.
A. Agency or Sales department
B. Actuarial Department
C. Investment Department
D. Claims Department

24. An insurance company that practices _____ carries out some or all basic functions at
branches.
A. Decentralization
B. Centralization
C. Subrogation
D. Distribution
Mock Exam Set 4
25. Which of the following states a disadvantage of Centralization?
A. Delay in quotation given to customer
B. Duplication of resources
C. Branches act as sales outlet
D. Provide prompt service to customer

26. An agreement which is illegal or against public policy would not be legally binding.
The contract drafted from these illegal issues is called:
A. Illegal Contracts
B. Void Contracts
C. Voidable Contracts
D. Unenforceable Contracts

27. Which of the following is the normal way to pay premium?
I. Yearly
II. Quarterly
III. Monthly
IV. Semi-yearly

A. I, II & III
B. II & III
C. I, III & IV
D. All of above

28. Which of the following are the consumer buying decision processes?
I. Problem Recognition
II. Information Search
III. Evaluation of Alternative Policies
IV. Purchase
V. Post-Purchase Evaluation

A. I, II, III & IV
B. II, III & IV
C. I, III, IV & V
D. All of above

29. Which of the following person is not categorized under insurable interest?
A. Spouse
B. Employee
C. Children
D. Fiance

30. Agents receive their remuneration from the principal usually in the form of _________.
A. salary
B. ex-gratia
C. commission
D. bonus

31. An impairment which causes increasing extra mortality is one which, with increasing
duration, becomes more and more a potent factor in affecting longevity. Which,
among the following, is classified as increasing extra mortality in the underwriting of
risks?
A. A young person who has suffered from tuberculosis but has been pronounced
cured.
B. A person who is overweight.
C. A person who is engaged in the liquor trade.
D. A construction worker.
Compiled by FSA
As at April 2008
Mock Exam Set 4
32. Which of the following may be provided for non-participating policies?
A. Guaranteed bonus.
B. Cash bonus.
C. Interim bonus.
D. Special bonus

33. A participating policy effected three years ago has a sum insured of RM100,000 and an
accumulated bonus of RM10,000. At the end of the fourth policy year, the life insurance
company declared a 2% compound reversionary bonus. Determine the amount of bonus
declared.
A. RM20
B. RM200
C. RM2,000
D. RM2,200

34. There is a special form of bonus which is payable when the policy becomes a claim after a
stipulated period. This bonus is called ______bonus.
A. maturity or terminal
B. interim
C. special
D. simple

35. The principle of utmost good faith requires a proposer to a life insurance contract to
A. answer only questions in a proposal form.
B. disclose all material facts he is aware of even if no question is specifically asked.
C. disclose facts he considers material to the risk.
D. disclose only the facts as advised by the agent.

36. Which of the following regarding a proposal form is correct?
A. A proposal form consists of a series of questions drawn up by the insurer, requesting
certain information which will enable them to assess the proposed risk.
B. The issuance of a blank proposal form constitutes an offer by the insurer.
C. A proposer is not required to give material information in the proposal form.
D. A life insurance contract comes into force when a proposal is submitted.

37. The _____________ is the document evidencing the contract between the insurer and the
insured.
A. letter of acceptance
B. life insurance proposal
C. life insurance policy
D. first premium receipt

38. The following are the various settlement options available to the policyholder on the maturity
of the policy, EXCEPT
A. acceptance of the proceeds in cash.
B. conversion of the proceeds into a life annuity.
C. conversion of the cash sum into a paid up whole life insurance.
D. payment of the entire sum to the Department of Inland Revenue.

39. The following can be used as proof of death EXCEPT
A. a certificate of death.
B. the coroner's report.
C. an international passport.
D. an order pronouncing a statutory presumption of death.
Compiled by FSA
As at April 2008
Mock Exam Set 4
40. If the date of birth of a person is 22 J an 1968, and he had purchased a life insurance policy
on 28 J uly 2005, what would be his age at the nearest birthday?
A. 35 years old
B. 36 years old
C. 37 years old
D. 38 years old

41. The Code of ethics and Conduct applies to all EXCEPT
A. those who sell life insurance
B. employees of a life insurance company
C. registered insurance brokers
D. none of the above

42. Which of the following practice is/are unethical
I. Influence the policyholder and completing the proposal form for the policyholder.
II. Ensure that the consequences of non-disclosure are pointed out to the policyholder by
drawing his attention to the relevant statements in the proposal form and by explaining
them to the policyholder.

A. I
B. II
C. I and II
D. none of the above

43. What is the amount to which 8,000 invested for 3 years would accumulate at compound
interest rate of 7.5% per annum.
A. 8000.38
B. 8003.38
C. 8600
D. 9938.38

44. Section 153 of the Insurance Act 1996 provides that a minor above age ______ can enter
into a legally binding insurance contract.
A. 21
B. 18
C. 16
D. 15

45. Which of the following alteration is NOT ALLOWED?
A. Change of mode of payment
B. Change of life insured
C. Change of policy plan
D. Change of policy term

46. What is the meaning of consensus ad idem?
A. Of the same mind
B. Disagreement
C. Meeting of the parties to contract
D. Uberrima fides

47. Which of the following is the evidence of premium payment for the policyholder?
A. Official receipt
B. Premium notice
C. Policy register
D. Proposal form
Compiled by FSA
As at April 2008
Mock Exam Set 4
48. Which of the following are the methods of handling risk?
I. Risk avoidance
II. Loss control
III. Risk retention
IV. Risk transfer

A. I, II and III
B. I, III and IV
C. II, III and IV
D. I, II, III and IV

49. When buying life insurance, a fund is collected to put into a common fund; this fund is called
_____________ .
A. shares
B. interest
C. premium
D. investment

50. The principal has the following duties towards his agents
A. To provide good accommodation
B. To pay remuneration as agreed
C. To provide transport convenience
D. To provide free policy

51. Which of the following is NOT a department in the General Insurance Office?
A. Underwriting Department
B. Claims Department
C. Transport Department
D. Sales Department

52. When the charge is computed after taking into account the element of mortality and interest,
it is called
A. Net Premium
B. Risk Premium
C. Gross Premium
D. Pure Premium

53. What is Material Fact?
A. a matter that diminishes the risk
B. a fact which will influence an insurer in deciding the acceptance of the risk
C. a fact which will not influence in assessing the risk
D. is of common knowledge to insured and insurer

54. The legislation in Malaysia that regulates Islamic insurance is
A. The Insurance Act 1996
B. The Central Bank of Malaysia Ordinance 1958
C. Muslim (Titles and Construction) Ordinance 1952
D. The Takaful Act 1984

55. One who may do anything for his principal within the limits of a general authority conferred
upon him.
A. Special Agent
B. General Agent
C. Universal Agent
D. Underwriting Agent

Compiled by FSA
As at April 2008
Mock Exam Set 4
56. Trade risk is not insurable because it is a
A. pure risk
B. fundamental risk
C. particular risk
D. speculative risk

57. The functions of insurance include the following
I. Stimulates business enterprise
II. Reduction of losses
III. Provides employment for many
IV. Sources of capital for investment

A. II & IV
B. II, III & IV
C. I & II
D. I, II, III & IV

58. Which of the following describe the definition of risks?
A. An uncertainty regarding loss
B. A condition that increases the chance of loss
C. A reduction of economic value
D. All of the above

59. Which of the following is NOT true about the categories of risk?
A. Particular risks are the responsibility of the individuals themselves
B. Pure risks exists when there is the possibility of either loss or no loss
C. Investment in the stock market is considered as speculative risk
D. Pure risk and speculative risk can easily be handled by insurance technique

60. Risk of property damage from earth quake, flood and typhoon is classified under
A. Fundamental Risk
B. Speculative Risk
C. Particular Risk
D. Pure Risk

61. The essential elements of a contract are offer, acceptance and
A. consideration
B. legality of object
C. capacity to contract
D. All of the above

62. Following are among the few stages in the consumer buying decision process, EXCEPT:
A. Evaluation if alternative policies
B. Pre-purchase evaluation
C. Problem recognition
D. Information search

63. Such an authority is deemed to have been exercised by an agent when he/she performs an
act which is not within his actual authority, but which later becomes binding on the principal.
A. Express authority
B. Implied authority
C. Ratification
D. Apparent authority
Compiled by FSA
As at April 2008
Mock Exam Set 4
Compiled by FSA
As at April 2008
64. The basic theory to all insurance is that insurance provides a means of meeting an economic
loss by
A. transferring the loss
B. sharing the loss
C. assuming the loss
D. preventing the loss

65. In general insurance(excluding marine insurance), insurable interest must exist
A. at the time of entering into the contract
B. at time of loss
C. at the beginning and at time of loss
D. when marine insurance is involved

66. The principle of indemnity states that
A. the insures should restore the insured to the same financial position as before the loss.
B. the insures should restore the insured to a better financial position as before the loss.
C. the insures should restore the insured to a lesser financial position as before the loss.
D. the insured should enjoy indemnity which is less than his loss as a result of policy
limitations.

67. Which of the following is NOT true about a claim under the principle of subrogation?
A. This type of subrogation is considered as arising out of tort
B. In absence of subrogation, the insured cannot get his claim
C. In the presence of subrogation, the insured can either claim from the insurer or the
negligent party
D. The principle of subrogation applies to prevent the insured from making profit out of his
loss

68. Which of the following is NOT true about insurance market?
A. An insurance market refers to the facilities of buying and selling insurance
B. A propriety company is owned by shareholders and profits earned belong to them
C. A co-operative society is owned by shareholders and policyholders which may be termed
as a mutual insurer
D. The intermediaries in the insurance market are agents and brokers

69. Which of the following is the definition of Void Contracts?
A. The contract will remain valid until the aggrieved party exercise the option to treat it void
B. Contracts which are unenforceable without being void
C. Contracts which are simply one that the law held to be no contract at all
D. None of the above

70. What do you understand when the organization of a company is said to be decentralized?
A. When the preparation of all policies and renewal, etc. is carried out in the head office
B. When only the preparation of policies and renewal of the policies are come out in the
branches concerned
C. When there are no branches
D. When underwriting, claims and serving of the branch business are handled at the
branches up to a prearranged limit

71. A person effecting a life insurance policy on his own life has an insurable interest which is
A. unlimited
B. limited to his annual income
C. dependent on his state of health
D. dependent on his saving capacity

Mock Exam Set 4
72. If no insurable interest existed at the time a policy was taken out, the policy becomes
A. Voidable, depending on the judgment of the High Court
B. Void, the company is not obliged to pay a claim under the policy
C. Voidable, the company may or may not be obliged to pay a claim under the policy
depending on the discretion of the management
D. Unenforceable, the policy is still recognized by the court as still subsisting but no claim
can be made

73. A misrepresentation in a life insurance application is considered to be a material
misrepresentation whenever the
A. insurer discovers the misrepresentation after the policys contestable period
B. applicant for insurance intentionally makes a misrepresentation
C. representation is not literally true, regardless of its significance
D. misrepresentation is relevant to the insurers acceptance of the risk

74. The purpose of the insurable interest requirement in life insurance contract is to
A. establish that a genuine risk of loss exists at the time of purchase
B. ensure that the beneficiary has an insurable interest in the insured at the time of death
C. reduce the chance that an individual will be over-insured
D. ensured that the insurance company will pay the death benefit

75. An agency can be terminated by the following acts EXCEPT
A. the principal receiving many complaints
B. the principal revokes the authority
C. the life insurance company becoming bankrupt
D. the agent renouncing the agency

76. In contract law, a statement of fact which is made a part of the contract itself and which must
be exactly true if the contract is to be valid is known as
A. an affidavit
B. an affirmation
C. a representation
D. a warranty

77. An agent is deemed to be an agent of the proposer if
A. he delivers the policy contracts on behalf of the insurer
B. he transfers the premium collected to the insurance company
C. he completes an application form on behalf of the proposer
D. he advises the proposer on the needs for life insurance

78. The tendency of persons with greater likelihood of loss to apply for life insurance is called
A. impairment
B. persistency
C. antiselection
D. selective purchase

79. Over-insurance means
A. a person purchased policies from too many companies
B. a person purchase too many policies from one company
C. a person has the capacity to pay the premiums for his policy/policies
D. a person does not have the capacity to pay the premiums for his policy/policies
Compiled by FSA
As at April 2008
Mock Exam Set 4
Compiled by FSA
As at April 2008
80. Measurement of the incidence and severity of sickness and accidents which may be
expected to occur in a predefined group of persons are known as
A. Mortality rates
B. Morbidity rates
C. Survivorship rates
D. Probability rates

81. To discontinue a policy or to have a policy made paid-up and then to effect a new one in
another company or the same company is called
A. twisting
B. rebating
C. underwriting
D. prospecting

82. After the expiration of the incontestability period the Insurer can still repudiate the claim
under the following circumstances:
A. when the contract is breached
B. when fraud is proved
C. when the insurer was misled
D. when concealment of fact is proved

83. The maturity proceeds of life insurance policy
A. are taxable under Income Tax Act
B. are taxable under Real Property Gain Tax
C. are taxable under Estate Duty Enactment
D. are not taxable

84. The accumulation of excess premiums paid in earlier years to support payment of future
benefits in later year is called the
A. Common fund
B. Reserve
C. Investment fund
D. None of the above

85. In life insurance, the claim amount is determined at the very beginning of the contract. Such
contract is __________ contract.
A. indemnity
B. aleatory
C. subrogation
D. proximate

86. Premium rates are higher in the early years in order to avoid an increase in the premium in
the later years. This premium system is known as the
A. Natural premium system
B. Modified premium system
C. Level premium system
D. Graded premium system

87. The main objectives under a Childrens Deferred policy is
A. to provide for the school education of the child
B. to provide for the medical expenses of the child
C. to provide for the future life insurance needs of the child
D. to provide for the funeral expenses in case of early death of the child


Mock Exam Set 4
88. When a suicide clause is included in a life policy, it is usual for life officers to pay one of the
following when the insured commits suicide within the exclusion period
A. the face amount
B. the face amount less 1 year premium
C. the return of premiums only with interest
D. the return of premiums only

89. Tommy Lim made a proposal for a policy on his own life and received a letter of acceptance
stating that the policy would be issued on payment of the premium, but before the insurer
issued the policy document, Tommy Lim died in a car accident. The insurer had to pay the
claimant
A. the premium that had been received
B. the sum assured
C. the surrender value
D. nothing

90. Life insurance is the most practical means of meeting ones financial obligations arising from
an individuals premature death because
A. it creates an immediate estate
B. it always provides the most money
C. it is more accessible than savings or stocks
D. it earns the greatest interest

91. One different between individual life insurance and group life insurance is that a person who
is insured under a group life policy is not permitted to
A. convert the policy
B. select the amount of coverage he or she will have
C. change the beneficiary after the policy is in force
D. name any beneficiary he or she wishes

92. The characteristics of a paid-up policy are
I. the sum assured is reduced and payable under the same circumstances as the original
policy
II. no more premiums need to be paid
III. The bonuses already declared remain attached and the policy usually becomes non-
participating
IV. The policyholders would need to furnish proof of insurability to the insurance company

A. I & II
B. I, II & III
C. II, III & IV
D. All of the above

93. Under the following, which policy is suitable for persons with small income for the present but
with good prospects for the development of a successful career?
A. Renewable Term Insurance
B. Decreasing Term Insurance
C. Ordinary Life Policy
D. Anticipated Endowment Insurance

94. The doctrine of proximate cause is important for which type of claims?
A. death claims
B. maturity claims
C. personal accident claims
D. sickness and permanent health claims
Compiled by FSA
As at April 2008
Mock Exam Set 4
95. Permanent Health Insurance provides such benefit as
A. income during periods of sickness or disability
B. a lump sum payment on the diagnosis of any specified diseases which affects health of
life assured
C. a lump sum payment on any sickness incurred on the life assured
D. income equal to the insureds earning during periods of sickness or disability

96. Part of the Takaful installment made by participants and credited by the company into the
Participants Account (PA) is for
A. savings and tabaruk
B. savings and investments
C. investments and risk fund
D. investments and tabaruk

97. Raymond died as the result of illness five years after a whole life policy on his life was
issued. It was then discovered the his age has been overstated by four years on the
insurance applicant. In this case, the beneficiary of the policy would receive
A. an amount equal to the total of the premium Raymond paid
B. no payment
C. the face amount of the policy plus the amount of over-payment of premium
D. the cash value of the policy only

98. Mr. Tan had joined the Malaysian air Force 3 weeks before he purchased a RM20,000 10
year non-participating Endowment policy on his life. The policy contained an exclusion of
war clause. After two years, while on leave from active duty Mr. Tan was killed in an aero
plane accident on his way to Singapore. In this situation, Mr. Tan beneficiary is
A. not entitled to any payment
B. entitled to the face amount of the policy
C. entitled only to an amount equal to the premium paid
D. entitled to return of premiums with interest thereon at market rate

99. In order for a life company to be considered financially solvent, its assets must be at least
equal its
A. surplus
B. net profit
C. policy reserves and other liabilities
D. dividend accumulations

100. This section of policy stated the name of company and the address of its registered office, to
which all notice of assignment of the policy must be served.
A. the heading
B. the preamble
C. the operative clause
D. the proviso

Compiled by FSA
As at April 2008
Mock Exam Set 4
Compiled by FSA
As at April 2008



p ANSWERS

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