PA LIFE INSURANCE EXAM 160 2026 LIFE
INSURANCE PRINCIPLES AND REGULATIONS
ASSESSMENT STUDY GUIDE COMPLETE
QUESTIONS AND ANSWERS
◉ A type of insurer that is owned by its policyowners is called.
Answer: Mutual insurer
◉ What is considered to be the primary reason for buying life
insurance. Answer: Provide death benefits
◉ Fraternal Benefit Society has each of the following characteristics
EXCEPT. Answer: Exist for profit (FBS is a non profit entity, it is
incorporated, without capital stock, and exists for the benefit of its
members)
◉ What kind of life insurance policy issued by a mutual insurer
provides a return of divisible surplus?. Answer: participating life
insurance policy (A mutual insurer issues life insurance policies that
provide a return of divisible surplus.)
◉ An insurer's ability to make unpredictable payouts to
policyowners is called. Answer: liquidity
,◉ An insurer's claim settlement practices are regulated by the.
Answer: State insurance departments
◉ A nonparticipating company is sometimes called a. Answer: stock
insurer
◉ Which of the following is not considered advertising?
A.) a rating from a rating service company such as A.M. best
B.) an illustration
C.) A sales presentation
D.)Direct mailing from an agency. Answer: A.) a rating from a rating
service company such as A.M. best
◉ A nonparticipating policy will. Answer: not pay dividends
◉ Insurance represents the process of risk. Answer: transference
◉ A ______ is considered to be an event or condition that increases
the probability of an insureds loss?. Answer: Hazard
,◉ Insurance companies determine risk exposure by doing what?.
Answer: Law of Large Numbers (safety/predictability in large
groups) and risk pooling
◉ All of the following are examples of pure risk except?
A.) Losing money at a casino
B.) Injured while playing football
C.) Falling and breaking a hip
D.) Jewelry stolen during home robbery. Answer: A.) losing money at
a casino, this is speculative risk
◉ People with higher loss exposure have the tendency to purchase
insurance more often than those at average risk. This is called.
Answer: adverse selection
◉ How do insurers predict the increase of individual risks?. Answer:
law of large numbers
◉ What is known as the immediate specific event causing loss and
giving rise to risk?. Answer: peril
◉ The cause of a loss is called a. Answer: peril
, ◉ An example of risk sharing would be. Answer: Doctors pooling
their money to cover malpractice exposures
◉ An individual who removes the risk of losing money in the stock
market by never purchasing stock is said to be engaging in. Answer:
Risk avoidance
◉ Give an example of a consideration. Answer: A paid premium
◉ What makes an insurance policy a unilateral contract?. Answer:
Only the insurer is legally bound
◉ What contract element is insurable interest a component of
- Competent parties
- Offer and acceptance
-Consideration
- Legal Purpose. Answer: - Legal Purpose
◉ In an insurance contract, the element that shows each party is
giving something of value is called. Answer: consideration
◉ In order for a contract to be valid, it must. Answer: contain an
offer and acceptance, consideration, legal purpose, and competent
parties
INSURANCE PRINCIPLES AND REGULATIONS
ASSESSMENT STUDY GUIDE COMPLETE
QUESTIONS AND ANSWERS
◉ A type of insurer that is owned by its policyowners is called.
Answer: Mutual insurer
◉ What is considered to be the primary reason for buying life
insurance. Answer: Provide death benefits
◉ Fraternal Benefit Society has each of the following characteristics
EXCEPT. Answer: Exist for profit (FBS is a non profit entity, it is
incorporated, without capital stock, and exists for the benefit of its
members)
◉ What kind of life insurance policy issued by a mutual insurer
provides a return of divisible surplus?. Answer: participating life
insurance policy (A mutual insurer issues life insurance policies that
provide a return of divisible surplus.)
◉ An insurer's ability to make unpredictable payouts to
policyowners is called. Answer: liquidity
,◉ An insurer's claim settlement practices are regulated by the.
Answer: State insurance departments
◉ A nonparticipating company is sometimes called a. Answer: stock
insurer
◉ Which of the following is not considered advertising?
A.) a rating from a rating service company such as A.M. best
B.) an illustration
C.) A sales presentation
D.)Direct mailing from an agency. Answer: A.) a rating from a rating
service company such as A.M. best
◉ A nonparticipating policy will. Answer: not pay dividends
◉ Insurance represents the process of risk. Answer: transference
◉ A ______ is considered to be an event or condition that increases
the probability of an insureds loss?. Answer: Hazard
,◉ Insurance companies determine risk exposure by doing what?.
Answer: Law of Large Numbers (safety/predictability in large
groups) and risk pooling
◉ All of the following are examples of pure risk except?
A.) Losing money at a casino
B.) Injured while playing football
C.) Falling and breaking a hip
D.) Jewelry stolen during home robbery. Answer: A.) losing money at
a casino, this is speculative risk
◉ People with higher loss exposure have the tendency to purchase
insurance more often than those at average risk. This is called.
Answer: adverse selection
◉ How do insurers predict the increase of individual risks?. Answer:
law of large numbers
◉ What is known as the immediate specific event causing loss and
giving rise to risk?. Answer: peril
◉ The cause of a loss is called a. Answer: peril
, ◉ An example of risk sharing would be. Answer: Doctors pooling
their money to cover malpractice exposures
◉ An individual who removes the risk of losing money in the stock
market by never purchasing stock is said to be engaging in. Answer:
Risk avoidance
◉ Give an example of a consideration. Answer: A paid premium
◉ What makes an insurance policy a unilateral contract?. Answer:
Only the insurer is legally bound
◉ What contract element is insurable interest a component of
- Competent parties
- Offer and acceptance
-Consideration
- Legal Purpose. Answer: - Legal Purpose
◉ In an insurance contract, the element that shows each party is
giving something of value is called. Answer: consideration
◉ In order for a contract to be valid, it must. Answer: contain an
offer and acceptance, consideration, legal purpose, and competent
parties
