PA LIFE INSURANCE LATEST 2026 EXAM QUESTIONS AND
ANSWERS SCORED A+
✔✔moral hazards - ✔✔an individuals traits or habits that increase the chance of a loss.
examples: alcoholism, smoking and drug addiction.
✔✔morale hazards - ✔✔individual tendencies arising from a state of mind, attitude or
indifference to loss. example: driving recklessly ( In fact, doing anything recklessly
because "I have insurance for that" demonstrates a morale hazard.)
✔✔physical hazards - ✔✔individual physical characteristics that increase the chance of
loss. They exist due to a person's physical condition as opposed to arising from his or
her character. High cholesterol is an example of a physical hazard.
✔✔risk management techniques - ✔✔avoiding the risk
reducing the risks
retaining the risks
sharing the risks
transferring the risk
✔✔risk management - ✔✔natural process we all go through to contend with the perils
we face daily
✔✔risk avoidance - ✔✔reasonable strategy to deal with especially dangerous (and
avoidable) risks.
✔✔risk reduction - ✔✔does not eliminate the possibility of loss.
✔✔risk retention - ✔✔the acceptance of risk and dealing with it through the use of
personal funds should a loss occur.
✔✔deductible - ✔✔a risk retention device, people retain the financial consequence of
small losses, leaving the insurance to cover the larger ones.
✔✔risk sharing - ✔✔group of people who share a common risk band together and
promise to "chip in" and compensate a member of the group who suffers a covered
loss. easier for smaller groups but difficult to achieve in larger groups.
✔✔risk transfer - ✔✔transferring the loss to a third party. (basis for most forms of
insurance today)
✔✔To be insurable, a pure risk must conform to certain requirements: - ✔✔The type of
loss must be definable. The loss must be definite as to time, cause, and location.
, The potential for financial loss must be measurable. The value of the loss that is to be
insured must be definite.
The insured event must be accidental or outside the insured's control. Only losses that
are due to chance are insurable. Even though it is inevitable, death is an insurable risk
because of the uncertainty as to when it occurs.
The defined risk must be part of a large group of similar (or homogeneous) risks that the
insurance company can use to predict future losses.
The defined risk must not be catastrophic. Insurance companies do not cover war or
associated perils that might stem from disagreements between countries.
The risk must not be one of the company's stated exclusions.
✔✔underwriting - ✔✔insurance company underwriters determine if the risk proposed for
insurance should be accepted or rejected.
✔✔agents report - ✔✔includes information about the client that would be useful to the
underwriter.
✔✔law of large numbers - ✔✔a statistically accurate way to predict future losses. (the
law of large numbers is the mathematical principle of probability that insurance is based
on.)
✔✔actuaries - ✔✔insurance company mathematicians,
determine the likelihood of death (mortality) or serious illness (morbidity) for males and
females at any given age.
✔✔mortality - ✔✔rate of death in the target population, significant factor in determining
life insurance premiums.
✔✔adverse selection - ✔✔means to select against. (It is the tendency of persons at
greater risk of loss to seek out and maintain insurance. For example, a person with a
serious illness is more likely to seek out life or health insurance or renew an existing
policy than a healthy person.)
✔✔National Association of Insurance Commissioners (NAIC) - ✔✔represents the
insurance department of every state, the District of Columbia, and several U.S.
territories.
✔✔National Conference of Insurance Legislators (NCOIL) - ✔✔s comprised of state
legislators from every state. The NCOIL works to help state legislators make informed
decisions on insurance issues that affect their constituents.
ANSWERS SCORED A+
✔✔moral hazards - ✔✔an individuals traits or habits that increase the chance of a loss.
examples: alcoholism, smoking and drug addiction.
✔✔morale hazards - ✔✔individual tendencies arising from a state of mind, attitude or
indifference to loss. example: driving recklessly ( In fact, doing anything recklessly
because "I have insurance for that" demonstrates a morale hazard.)
✔✔physical hazards - ✔✔individual physical characteristics that increase the chance of
loss. They exist due to a person's physical condition as opposed to arising from his or
her character. High cholesterol is an example of a physical hazard.
✔✔risk management techniques - ✔✔avoiding the risk
reducing the risks
retaining the risks
sharing the risks
transferring the risk
✔✔risk management - ✔✔natural process we all go through to contend with the perils
we face daily
✔✔risk avoidance - ✔✔reasonable strategy to deal with especially dangerous (and
avoidable) risks.
✔✔risk reduction - ✔✔does not eliminate the possibility of loss.
✔✔risk retention - ✔✔the acceptance of risk and dealing with it through the use of
personal funds should a loss occur.
✔✔deductible - ✔✔a risk retention device, people retain the financial consequence of
small losses, leaving the insurance to cover the larger ones.
✔✔risk sharing - ✔✔group of people who share a common risk band together and
promise to "chip in" and compensate a member of the group who suffers a covered
loss. easier for smaller groups but difficult to achieve in larger groups.
✔✔risk transfer - ✔✔transferring the loss to a third party. (basis for most forms of
insurance today)
✔✔To be insurable, a pure risk must conform to certain requirements: - ✔✔The type of
loss must be definable. The loss must be definite as to time, cause, and location.
, The potential for financial loss must be measurable. The value of the loss that is to be
insured must be definite.
The insured event must be accidental or outside the insured's control. Only losses that
are due to chance are insurable. Even though it is inevitable, death is an insurable risk
because of the uncertainty as to when it occurs.
The defined risk must be part of a large group of similar (or homogeneous) risks that the
insurance company can use to predict future losses.
The defined risk must not be catastrophic. Insurance companies do not cover war or
associated perils that might stem from disagreements between countries.
The risk must not be one of the company's stated exclusions.
✔✔underwriting - ✔✔insurance company underwriters determine if the risk proposed for
insurance should be accepted or rejected.
✔✔agents report - ✔✔includes information about the client that would be useful to the
underwriter.
✔✔law of large numbers - ✔✔a statistically accurate way to predict future losses. (the
law of large numbers is the mathematical principle of probability that insurance is based
on.)
✔✔actuaries - ✔✔insurance company mathematicians,
determine the likelihood of death (mortality) or serious illness (morbidity) for males and
females at any given age.
✔✔mortality - ✔✔rate of death in the target population, significant factor in determining
life insurance premiums.
✔✔adverse selection - ✔✔means to select against. (It is the tendency of persons at
greater risk of loss to seek out and maintain insurance. For example, a person with a
serious illness is more likely to seek out life or health insurance or renew an existing
policy than a healthy person.)
✔✔National Association of Insurance Commissioners (NAIC) - ✔✔represents the
insurance department of every state, the District of Columbia, and several U.S.
territories.
✔✔National Conference of Insurance Legislators (NCOIL) - ✔✔s comprised of state
legislators from every state. The NCOIL works to help state legislators make informed
decisions on insurance issues that affect their constituents.
