Test yourself - Final Exam 2024

1. Based on experience, an insurer can predict with reasonable accuracy that 30 of 10,000
automobiles, on the average, destroy or damage by collision each year incurred losses
of $990,000. Assuming that loading ratio is 25%. The pure premium equals .........
dollars.
a. 33000 b. 132 c. 99 d. 0.0033
2. The probability that a person aged 32 will live ten years is 0.94 and that he will live 30
years is 0.63. The probability that a person aged 42 will live to age 62 is ……… .
a. 0.9 b. 0.67 c. 0.69 d. 1.33
3. An insured aged 25 years purchased a ten-year Term life annuity that will give him
$2500 annually. Calculate the net single premium if the first payment is at age 35
(m=10 and n=10)
a. $16930.78 b. $39457.2 c. $62521.6 d. $20560
4. A person aged 25 purchased a term life insurance under which the insurer will pay
$25,000 if he dies between age 30 and 40. Calculate the net single premium.
a. $978.5 b. $479.18 c. $784.08 d. $375.3
5. A policy issued to a person aged 30 provides the following: (a) $100,000 if he dies
before age 50, (b) $200,000 if he survives to reach the exact age 50. What is the net
single premium?
a. $359181.4 b. $290590.7 c. $166886 d. $118362.83
6. A $80,000, 15-year pure endowment insurance policy was bought by someone aged 30.
Find the 10-payment net annual premium.
a. $4163.1 b. $5936.7 c. $5995.9 d. $4533.3
7. If a person aged 40 years buys an insurance contract under which his wife receives
$50,000 if he dies within 10 years. Find the ordinary annual premium:
a. $252.55 b. $325.7 c. $2230 d. $12867.2
8. A policy issued to a person aged 30 provides the following: (a) $200,000 if he survives
to reach the exact age 40, (b) $200,000 if he dies before age 40. Find ordinary annual
premium:
a. $67930.3 b. $89507.1 c. $232632.7 d. $17641.93
9. Assume that an insured owns an apartment house and he insure it for $20,000 at three
companies as follows:
Insurer Face Amount
A 10,000
B 6,000
C 4,000
If ACV = $20,000 and coinsurance clause is present, and loss occurred is $10,000,
insurers payments for this loss are:
a. $4,000 company A, $3,000 company B, and $1,000 company C.
b. $10,000 company A, $6,000 company B, and $4,000 company C.
c. $4,000 company A, $2,400 company B, and $1,600 company C.
d. $5,000 company A, $3,000 company B, and $2,000 company C.
10. From the following table:
𝐱 50 51 52 53 54 55 56
𝐋𝐱 8400 8250 8000 7700 7500 7100 6800
The probability that a man aged 52 will die between age 54 and 56.
a. 0.0925 b. 0.0875 c. 0.0071 d. 0.4095
True or False
1. Declaration provides basic information about the property or life be insured.
2. The pure endowment insurance policy is the most expensive insurance policy.
3. The “limited” net annual premium is larger than the “ordinary” net annual premium.
4. Under a pure endowment contract, If the insured dies before the end of contract, his
beneficiaries will not receive the face amount of the policy.
5. A complete expectation of life means the average number of years to be lived in the
future assuming that death occurs at the end of the year.
6. In the double endowment insurance contract, the amount of term insurance is double
the amount of the pure endowment insurance.
7. A person aged 30 purchased a whole life insurance under which the insurer will pay
$150,000 upon death. The limited annual premium (for y=20 payments) is $3633.1.
8. Term insurance is the cheapest type of life insurance contracts.
9. To calculate the objective risk, we should apply the equation as:
𝐀𝐜𝐭𝐮𝐚𝐥 𝐍𝐨.𝐨𝐟 𝐋𝐨𝐬𝐬𝐞𝐬 (−)𝐄𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐍𝐨.𝐨𝐟 𝐋𝐨𝐬𝐬𝐞𝐬
𝐎𝐛𝐣𝐞𝐜𝐭𝐢𝐯𝐞 𝐑𝐢𝐬𝐤 = × 𝟏𝟎𝟎
𝐄𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐍𝐨.𝐨𝐟 𝐋𝐨𝐬𝐬𝐞𝐬

10. Based on last experience in fire insurance, an insurer determined pure premium at
$2400 and if loading ratio is 25%, the gross premium equals $3250 dollars.
11. If the probability that an individual at aged 20 will survive to reach age 28 = 0.91234
and number of survivors at age 28 = 22592, then number of survivors at age 20 = 20612
12. If 10p25 = 0.0018, this means that among of 10000 persons live at age 25, 18 persons
may die before reaching age 35.
13. If the last age in a given mortality table is 100 and number of survivors at age 50 =
20000, then number of deaths between age 50 and age 100 = 200.
14. The probability that an individual aged zero dying before reaching age 100 = 1 (the
last age is 100).
15. The symbol Nx is widely used in annuities and annual premiums.
16. The net single premium of a $10,000 pure endowment policy payable in 10 years to a
𝐋𝟑𝟓
person now aged 25 equals 𝟏𝟎, 𝟎𝟎𝟎 𝐕 𝟏𝟎
𝐋𝟐𝟓

17. The law of large numbers stated that: when number of exposure units increases, the
insurance company can’t predict its future losses with a high degree of accuracy.
18. Chemical material in a plant is a morale hazard that increases the chance of fire.
19. Death of a friend and failure in an exam these cases are example of nonfinancial risks.
20. Risk control focuses on maximizing the probability of loss or severity of losses.
21. Social insurance covers employees in the government only.
22. Ocean marine insurance provides protection for goods and ships.
23. The principle of indemnity is applied in life insurance.
24. In over insurance: the actual cash value is smaller than the face or carried amount of
insurance.
25. All insurance contracts must be supported by an insurable interest.
26. Insured have to pay additional premium under an endorsement or rider.
27. Pro rate liability clause (or contributions clauses) is applied when more than one
policy covers the same risk for the same period.
28. The gross premium is more than the net premium by the amount of the additional
loadings of the insurance contract.
29. In life policies, annual premiums are payable at the beginning of each year.
30. The endowment insurance policy consists of a pure endowment contract and a whole
life death contract.
The Commutation Table at 2.5%
𝐗 𝐃𝐗 𝐍𝐗 𝐂𝐗 𝐌𝐗 𝐗
0 10000 324850 69.07 2076 0
1 9687 314850 16.63 2007 1
20 5898 167827 10.3 1804 20
21 5744 161929 10.26 1794 21
25 5165 139840 9.725 1754 25
26 5029 134675 9.617 1744 26
30 4520 115338 9.392 1706 30
31 4400 110818 9.401 1697 31
35 3950 93907 9.672 1659 35
40 3442 75195 11.85 1607 40
45 2979 58928 15.55 1541 45
50 2549 44904 20.69 1454 50
53 2303 37505 24 1366 51
60 1750 23056 34.72 1187 60

Best of luck 
Solution
MCQ
1 2 3 4 5 6 7 8 9 10
c b a b d b a d d b

True or False
1 2 3 4 5 6 7 8 9 10
T F T T F F T T T F
11 12 13 14 15 16 17 18 19 20
F F F T T T F F T F
21 22 23 24 25 26 27 28 29 30
F T F T T T T T T F