SOFE SOFE Certifications AFE Questions & Answers

• Question 241:

  A liability for premiums paid in advance can also arise when insurers allow policyholders to pay several years' premiums at one time. Since the insurer has the use of policyholder funds that are not yet due, it is customary for the insurer to:

  A. Credit Assets

  B. Discount the value of such premiums and accept a lesser amount in cash

  C. Discount the value of such premiums

  D. Accept a lesser amount in cash

  Correct Answer: B

• Question 242:

  A logical first step toward understanding of a life and health insurance company and the related financial reporting considerations is to review the manner in which different interested parties view the end result of

  the accounting process for capital and surplus transactions, for example, the adequacy of the resulting

  balances.

  Key interested parties include:

  1.

  Policyholders

  2.

  Agents

  3.

  Stockholders

  4.

  Insurance regulators

  5.

  Rating agencies

  6.

  Management

  A. The capital and surplus accounts

  B. Supplementary loan agreements

  C. Mortgage loans

  D. Risk-based capital investments

  Correct Answer: A

• Question 243:

  Structured settlements are agreements characterized by the periodic payment of fixed amounts to a claimant in connection with the settlement of a legal claim. Such payments may last for the lifetime of the payee or they may be for a particular period of time, depending upon the terms of the settlement. The party responsible for making structured settlement payments may make payments:

  A. Directly

  B. To a claimant

  C. Any one of these

  D. None of these

  Correct Answer: C

• Question 244:

  When a retained asset account is established in the place of a cash settlement, an interest bearing

  account is created by the insurer for the beneficiary. The beneficiary receives a checkbook with which to

  draw upon funds in the new account.

  The account holder can make:

  A. Partial or total withdrawal of the account balance as needed and has total control over the account

  B. Partial withdrawal of the account balance as needed and has total control over the account

  C. Total withdrawal of the account balance as needed and has total control over the account

  D. 25% withdrawal of the account balance as needed and has total control over the account.

  Correct Answer: A

• Question 245:

  ________ are contracts with the insurer which provide for periodic payments over a specified period or in specified amounts. In most respects they are administered and accounted for much like supplementary contracts without life contingencies since there are no mortality or morbidity considerations that affect the amount to be paid.

  A. Mixed stream

  B. Annuities certain

  C. Annuities due

  D. Ordinary Annuities

  Correct Answer: B

• Question 246:

  In case of supplementary contracts, the amount of each payment is computed on the basis of the assumed (or guaranteed) interest rate and the number and frequency of payments selected. For example:

  A. The higher the assumed interest rate, the larger the amount of each payment

  B. The lower the assumed interest rate, the larger the amount of each payment

  C. The higher the assumed interest rate, the smaller the amount of each payment

  D. The higher the actual interest rate, the larger the amount of each payment

  Correct Answer: A

• Question 247:

  Supplementary contracts may be issued by an insurer upon the termination of a life insurance contract that has been terminated by death, maturity, or surrender. The policyholder, if living or the beneficiary elects the option under which the proceeds are paid. The payment options usually available are:

  A. To receive a guaranteed fixed number of payments

  B. To receive payments of a certain amount until the proceeds are exhausted.

  C. To leave the proceeds with the insurer to earn interest with payment to be made at a later date.

  D. Any one out of these

  Correct Answer: D

• Question 248:

  Experience refund provisions of group insurance contracts are most often concerned with the manner of distributing any profits between the insurer and the insured group. The agreements usually contain provisions specifying how losses will affect the profit allocations for the insured group. In such situation:

  A. Losses may or may not be charged back

  B. Losses can never be charged back

  C. Gains are distributed according to the agreement between both the parties

  D. If charged back, losses for each group are usually accumulated for a certain number of years

  Correct Answer: AD

• Question 249:

  When dividends are left to accumulate at interest, the insurer typically sends a notice to each policyholder showing the amount accumulated at the end of the policy year. The notice also shows the dividend credited and interest earned for that policy year. The dividend left at interest may later be received by or credited to the policyholder in several ways. Which of the following is/are out of those ways?

  A. As a cash withdrawal.

  B. As premium applied to the purchase by the policyholder of paid-up insurance.

  C. As marketable securities

  D. As premium to pay up or mature the policy.

  Correct Answer: ABD

• Question 250:

  Sales of securities are recorded as of the trade date. A receivable due from the broker is established in instances when a security has been sold, but the proceeds from the sale have not been received. Receivable for securities not received within settlement date are non-admitted, and are classified as other than invested assets.

  A. 15 days

  B. 30 days

  C. 35 days

  D. 90 days

  Correct Answer: A