Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) Long-Term Insurance Coverages and Retirement Financial Security Programs Practice Questions
Long-term insurance coverages on SOA Exam FAM cover the structure of life insurance products (term, whole life, endowment), pension plans (defined benefit and defined contribution), and social insurance programs.
Sample Questions
Question 1
Easy
Which of the following is NOT a type of long-term health insurance?
Solution
C is correct.
Personal auto liability is a short-term P&C coverage, not long-term health insurance.
The answer is personal auto liability.
Personal auto liability is a short-term P&C coverage, not long-term health insurance.
The answer is personal auto liability.
Question 2
Medium
A creditor has loaned $200,000 to a business. To protect against the debtor's death, the creditor purchases a life insurance policy on the debtor with a face amount of $300,000.
Which of the following statements is most accurate?
Which of the following statements is most accurate?
Solution
E is correct.
In practice, the rules regarding the extent of a creditor's insurable interest vary by jurisdiction. However, the general principle is:
**A creditor has insurable interest in a debtor's life.** While some jurisdictions may limit the insurable interest to the amount of the debt, many jurisdictions allow a policy with a face amount exceeding the debt, recognizing that:
- The debt may grow with interest
- There are costs of collection and replacement financing
- Life insurance is not treated as an indemnity contract (unlike property insurance)
For exam purposes, the standard teaching is that **life insurance policies are generally valid for the full face amount** once insurable interest exists at inception, even if the face amount exceeds the financial interest.
In practice, the rules regarding the extent of a creditor's insurable interest vary by jurisdiction. However, the general principle is:
**A creditor has insurable interest in a debtor's life.** While some jurisdictions may limit the insurable interest to the amount of the debt, many jurisdictions allow a policy with a face amount exceeding the debt, recognizing that:
- The debt may grow with interest
- There are costs of collection and replacement financing
- Life insurance is not treated as an indemnity contract (unlike property insurance)
For exam purposes, the standard teaching is that **life insurance policies are generally valid for the full face amount** once insurable interest exists at inception, even if the face amount exceeds the financial interest.
Question 3
Hard
A whole life policy with face amount 200,000 is issued to (40). It includes a double indemnity rider paying an additional 200,000 on accidental death before age 65. You are given:
, ,
Calculate the level annual net premium for the combined coverage.
, ,
Calculate the level annual net premium for the combined coverage.
Solution
E is correct.
APV of total benefits:
1. Base whole life:
2. Double indemnity rider:
Total APV:
Level annual net premium:
The answer is 1,890.
APV of total benefits:
1. Base whole life:
2. Double indemnity rider:
Total APV:
Level annual net premium:
The answer is 1,890.