United States
Hong KongTypes of life policies: the 15-question section
Section I is worth 15 questions, one of the two largest life sections on the paper. It covers five families: traditional whole life, interest-sensitive and market-sensitive products, term, annuities and combination plans. Questions are almost always recognition questions, where a described need or feature has to be matched to the right product.
Fifteen questions come out of this section, and they are the most predictable fifteen on the paper. The exam wants one thing from you here: given a description, name the product. That is a shallower demand than it looks, and it is why this section is the right place to start.
The five families the outline names
| Family | What the outline lists | The distinguishing feature |
|---|---|---|
| Traditional whole life | Ordinary whole life, limited-pay, single-premium | Premium is level and guaranteed, cash value is guaranteed |
| Interest and market sensitive | Universal, variable whole, variable universal, interest-sensitive whole, indexed | Something about the contract floats: the credit rate, the premium, or both |
| Term | Level, decreasing, return of premium, annually renewable | No cash value, coverage for a stated period only |
| Annuities | Single and flexible premium, immediate and deferred, fixed and variable, indexed | Pays out over a lifetime rather than at death |
| Combination plans | Joint life, survivorship life | Two insureds, one policy, and the trigger differs |
Read the table again and notice what it does not include. Group life is not here. It sits in section IV under retirement and other insurance concepts, which is a smaller section, and candidates lose a mark or two by studying it as if it were a product type.
What the exam does with each family
Whole life
Two questions matter: how long you pay, and how much you pay. Ordinary whole life spreads premiums to the end. Limited-pay compresses them into a stated number of years, so each one is larger. Single-premium is the extreme case, one payment, and it is immediately worth cash. Everything else about the family follows from that.
Interest and market sensitive products
This is where the section gets its difficulty. Five products, and the separations run on two axes: who bears the investment risk, and whether the premium is flexible. Universal is flexible premium with a declared interest rate. Variable products put the cash value in separate accounts, which moves the investment risk onto the owner and brings a securities registration into the picture. Indexed products credit interest by reference to an index without being invested in it.
Term
Level, decreasing, return of premium and annually renewable, plus two features the outline lists separately: renewable and convertible. Those two are the highest-value pair in this section, because they sound alike, and they are separated properly in renewable against convertible.
Annuities
Six sub-items, more than any other family here, and they include the accumulation and annuity periods and the payout options. Annuities are the part of this section most likely to be new to you if you are coming from outside the industry, and they carry a disproportionate share of the arithmetic on the paper.
Combination plans
Joint life pays on the first death. Survivorship life pays on the second. The outline spells out first to die and second to die beside each, so the distinction is handed to you, and it is still missed regularly because the words joint and survivorship do not obviously point in opposite directions.
An applicant wants coverage that ends when her mortgage is paid off, with a premium that stays the same throughout and no cash value at any point. Which policy fits?
- Decreasing term
- Level term
- Limited-pay whole life
- Universal life
How the section is likely to break down
Pearson publishes the 15, not the split beneath it. Ours, derived from the number of sub-items under each lettered heading, runs roughly like this.
| Family | Sub-items listed | Our estimate |
|---|---|---|
| Traditional whole life | 2 | 2 to 3 questions |
| Interest and market sensitive | 5 | 4 questions |
| Term | 6 including features | 3 to 4 questions |
| Annuities | 6 | 4 questions |
| Combination plans | 2 | 1 question |
Treat that as a planning aid and nothing more. It is our arithmetic on Pearson's list of sub-items, not a published weight, and no page here pretends otherwise.
The opinion, and the concession
The opinion: this is the section where a question bank beats a manual by the widest margin. Product recognition is a pattern-matching skill and you build it by seeing many stems, not by reading a table of features once. Fifteen questions is worth roughly a ninth of the general portion, and it is the fastest ninth to secure.
The concession: our estimated split above could be wrong in either direction, and there is a specific reason to think annuities might be heavier than the sub-item count suggests. Annuities also appear in the Texas life-only section, in the retirement section and in the tax questions, so an annuity idea can reach you from four directions at once. Nobody here has sat this paper, so we are reasoning from the document rather than from the room.
Common questions
How many questions cover life policy types?
Fifteen, published by Pearson beside section I of the general knowledge outline. That ties with life policy provisions as the largest life section and sits just below the 16 questions on accident and health policy types. Together the two life sections carry 30 of the 100 general questions.
Is group life covered in this section?
No. Group life appears in section IV, retirement and other insurance concepts, which is worth 8 questions in total. The outline lists it there with two sub-items, the conversion privilege and contributory against noncontributory plans, and Texas group life gets separate treatment in the state portion.
Do I need to know the math behind cash value?
No. The exam tests what a product does, not how the actuary priced it. You need to know that whole life guarantees cash value, that universal life credits a declared rate, and that variable products place the value in separate accounts where the owner carries the investment risk.
Which life product types get confused most often?
Variable whole life against variable universal life, and joint life against survivorship life. The first pair separates on premium flexibility, the second on which death triggers payment. Both are handed to you in the outline's own wording if you read the sub-item labels rather than skimming the headings.