QUESTION: 31

Loans on policies are valuable to the policyholders, and insurers encourage them to protect this feature by saving it for emergency use. There are two basic types of loans. In case of conventional premium loans:

The insured makes a request for a loan. Since an emergency may very well have triggered this request, most companies will accept any form of notice such as a telephone call
The maximum loan amount is frequently limited to the cash value of the policy plus the value of paid-up additions
an insured has indicated in the insurance application that the policy is not to lapse for nonpayment of premiums so long as there is loan value adequate to cover unpaid premiums
Loan can be created to pay policy loan interest if the policyholder-borrower does not pay it in cash

Answer(s): A,B

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QUESTION: 32

On both old and new business, companies can also avoid premium notes by entering into agreements involving deposits of a portion of the premium with an extension on the balance. These deposits are treated as:

A liability
Unearned revenue and not credited to income until the deposit is used to pay the premium
A liability and not credited to income until the deposit is used to pay the premium
Asset and not credited to income until the deposit is used to pay the premium

Answer(s): C

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QUESTION: 33

Cash does include funds in transit, unless the deposit was prepared and sent to the bank. If the deposit was sent to the bank, it is considered cash and entered into the company's books and is no longer in transit. Funds in transit not yet sent to the bank are entered:

On a write-in line on the Assets page
As a prepaid asset on the Assets page
As a long-term asset on the Assets page
As a non-admitted asset on Asset page

Answer(s): A

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QUESTION: 34

In the NAIC Accounting Practices and Procedures Manual there is limitation on the amount of EDP equipment and operating systems software, that can be shown as admitted assets. Companies are generally limited to _______________ of the reporting entity's capital and surplus, as reported in the financial statement most recently filed with the domiciliary commissioner adjusted to exclude any EDP and operating system software, net deferred tax assets and positive goodwill.

Four percent
Three percent
Five percent
Seven percent

Answer(s): D

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QUESTION: 35

Uncollected premiums

Are also an asset in statutory accounting
Are usually those past the due date but in the grace period
Accounting is similar to that for deferred premiums in that only the net premiums are necessary to match the reserve liability
Only A and B

Answer(s): A,B,C

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Free Financial AFE Exam Questions (page: 8)

QUESTION: 31

QUESTION: 32

QUESTION: 33

QUESTION: 34

QUESTION: 35

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