CMFAS Life Insurance M5 3

Question 1

What is the principle of utmost good faith in insurance?

Accepted Answer

Both parties must disclose all material facts honestly

Answer

Utmost good faith (uberrima fides) requires both the insurer and the insured to deal honestly and disclose all material information that could affect the policy.

Question 2

What is the concept of insurable interest?

Accepted Answer

The policyholder must stand to suffer a financial loss from the insured event

Answer

Insurable interest means the policyholder must have a financial stake in the continued existence of the insured — they would suffer financially from the loss.

Question 3

What is a lapsed policy?

Accepted Answer

A policy that has expired due to non-payment of premiums

Answer

A lapsed policy is one where the policyholder has stopped paying premiums and the grace period has expired, causing the coverage to terminate.

Question 4

What is reinstatement of a life insurance policy?

Accepted Answer

Restoring a lapsed policy to active status

Answer

Reinstatement is the process of restoring a lapsed policy to active status, usually requiring payment of overdue premiums and evidence of insurability.

Question 5

What is a participating policy?

Accepted Answer

A policy that participates in the insurer's profits through bonuses/dividends

Answer

A participating (par) policy entitles the policyholder to share in the insurance company's profits through annual bonuses or dividends.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Life Insurance M5 3