PSI Life, Accident & Health Exam 2026 –
Practice Questions & Verified Answers
Study Guide (Updated & Exam-Ready)
PSI Life, Accident & Health Exam 2026 – Practice Questions & Verified Answers
• This study guide contains 200 practice questions modeled after the real PSI Life,
Accident & Health licensing exam, covering all tested domains with verified answers
and clear EXPERT RATIONALE to reinforce understanding.
• Work through each question independently before checking the highlighted
correct answer and EXPERT RATIONALE below it — this active recall method is the
most effective way to prepare for exam day.
QUESTION 1
Which of the following best describes the concept of insurable interest in a
life insurance policy?
A) The insured must be related to the policyowner by blood or marriage
B) The policyowner must have a reasonable expectation of financial loss upon the
death of the insured
C) The beneficiary must prove financial dependency on the insured
D) The insurer must verify that the insured is in good health
E) The policyowner must be the same person as the insured
CORRECT ANSWER: B) The policyowner must have a reasonable
expectation of financial loss upon the death of the insured
EXPERT RATIONALE: Insurable interest exists when the policyowner would suffer a
financial loss or hardship upon the death of the insured. It must exist at the time the
policy is issued and is a legal requirement to prevent moral hazard and wagering on
lives.
QUESTION 2
,What is the grace period typically required in a life insurance policy?
A) 7 days
B) 10 days
C) 20 days
D) 31 days
E) 60 days
CORRECT ANSWER: D) 31 days
EXPERT RATIONALE: Most state laws require a minimum grace period of 31 days for life
insurance policies. During this period, the policy remains in force even if the premium
has not been paid, protecting the insured from an unintended lapse.
QUESTION 3
Which type of life insurance policy provides coverage for a specified period
and pays a death benefit only if the insured dies during that period?
A) Whole life insurance
B) Universal life insurance
C) Term life insurance
D) Variable life insurance
E) Endowment insurance
CORRECT ANSWER: C) Term life insurance
EXPERT RATIONALE: Term life insurance provides pure death protection for a specific
period (e.g., 10, 20, or 30 years). If the insured survives the term, no benefit is paid and
the policy expires, making it the most affordable type of life insurance.
QUESTION 4
,An applicant for life insurance completes an application but does NOT pay the
initial premium. When does coverage begin?
A) On the date the application is signed
B) On the date the insurer receives the application
C) On the date the policy is delivered and the premium is paid while the insured is
in good health
D) On the date the underwriter approves the application
E) On the date the agent submits the application to the insurer
CORRECT ANSWER: C) On the date the policy is delivered and the premium
is paid while the insured is in good health
EXPERT RATIONALE: When no initial premium is paid with the application, coverage
does not begin until the policy is delivered to the applicant, the first premium is
collected, and the insured is still in good health at the time of delivery.
QUESTION 5
Which of the following is NOT a common nonforfeiture option in a whole life
policy?
A) Cash surrender value
B) Reduced paid-up insurance
C) Extended term insurance
D) Automatic premium loan
E) Policy conversion option
CORRECT ANSWER: E) Policy conversion option
EXPERT RATIONALE: The three standard nonforfeiture options are cash surrender value,
reduced paid-up insurance, and extended term insurance. Automatic premium loan is
also available in many policies. Policy conversion is a feature of term insurance, not a
nonforfeiture option.
, QUESTION 6
What does the incontestability clause in a life insurance policy state?
A) The insurer can never contest a claim for any reason
B) After the policy has been in force for a specified period (usually 2 years), the
insurer cannot contest the validity of the policy based on misrepresentation
C) The insured cannot contest a denial of claim after 2 years
D) The insurer must pay all claims regardless of fraud
E) The beneficiary cannot be changed after 2 years
CORRECT ANSWER: B) After the policy has been in force for a specified
period (usually 2 years), the insurer cannot contest the validity of the policy
based on misrepresentation
EXPERT RATIONALE: The incontestability clause protects the insured's beneficiaries by
limiting the insurer's ability to void the policy due to misrepresentation after the policy
has been in force for typically two years, except in cases of outright fraud.
QUESTION 7
What type of beneficiary designation CANNOT be changed without the
beneficiary's consent?
A) Contingent beneficiary
B) Tertiary beneficiary
C) Revocable beneficiary
D) Irrevocable beneficiary
E) Class beneficiary
CORRECT ANSWER: D) Irrevocable beneficiary
Practice Questions & Verified Answers
Study Guide (Updated & Exam-Ready)
PSI Life, Accident & Health Exam 2026 – Practice Questions & Verified Answers
• This study guide contains 200 practice questions modeled after the real PSI Life,
Accident & Health licensing exam, covering all tested domains with verified answers
and clear EXPERT RATIONALE to reinforce understanding.
• Work through each question independently before checking the highlighted
correct answer and EXPERT RATIONALE below it — this active recall method is the
most effective way to prepare for exam day.
QUESTION 1
Which of the following best describes the concept of insurable interest in a
life insurance policy?
A) The insured must be related to the policyowner by blood or marriage
B) The policyowner must have a reasonable expectation of financial loss upon the
death of the insured
C) The beneficiary must prove financial dependency on the insured
D) The insurer must verify that the insured is in good health
E) The policyowner must be the same person as the insured
CORRECT ANSWER: B) The policyowner must have a reasonable
expectation of financial loss upon the death of the insured
EXPERT RATIONALE: Insurable interest exists when the policyowner would suffer a
financial loss or hardship upon the death of the insured. It must exist at the time the
policy is issued and is a legal requirement to prevent moral hazard and wagering on
lives.
QUESTION 2
,What is the grace period typically required in a life insurance policy?
A) 7 days
B) 10 days
C) 20 days
D) 31 days
E) 60 days
CORRECT ANSWER: D) 31 days
EXPERT RATIONALE: Most state laws require a minimum grace period of 31 days for life
insurance policies. During this period, the policy remains in force even if the premium
has not been paid, protecting the insured from an unintended lapse.
QUESTION 3
Which type of life insurance policy provides coverage for a specified period
and pays a death benefit only if the insured dies during that period?
A) Whole life insurance
B) Universal life insurance
C) Term life insurance
D) Variable life insurance
E) Endowment insurance
CORRECT ANSWER: C) Term life insurance
EXPERT RATIONALE: Term life insurance provides pure death protection for a specific
period (e.g., 10, 20, or 30 years). If the insured survives the term, no benefit is paid and
the policy expires, making it the most affordable type of life insurance.
QUESTION 4
,An applicant for life insurance completes an application but does NOT pay the
initial premium. When does coverage begin?
A) On the date the application is signed
B) On the date the insurer receives the application
C) On the date the policy is delivered and the premium is paid while the insured is
in good health
D) On the date the underwriter approves the application
E) On the date the agent submits the application to the insurer
CORRECT ANSWER: C) On the date the policy is delivered and the premium
is paid while the insured is in good health
EXPERT RATIONALE: When no initial premium is paid with the application, coverage
does not begin until the policy is delivered to the applicant, the first premium is
collected, and the insured is still in good health at the time of delivery.
QUESTION 5
Which of the following is NOT a common nonforfeiture option in a whole life
policy?
A) Cash surrender value
B) Reduced paid-up insurance
C) Extended term insurance
D) Automatic premium loan
E) Policy conversion option
CORRECT ANSWER: E) Policy conversion option
EXPERT RATIONALE: The three standard nonforfeiture options are cash surrender value,
reduced paid-up insurance, and extended term insurance. Automatic premium loan is
also available in many policies. Policy conversion is a feature of term insurance, not a
nonforfeiture option.
, QUESTION 6
What does the incontestability clause in a life insurance policy state?
A) The insurer can never contest a claim for any reason
B) After the policy has been in force for a specified period (usually 2 years), the
insurer cannot contest the validity of the policy based on misrepresentation
C) The insured cannot contest a denial of claim after 2 years
D) The insurer must pay all claims regardless of fraud
E) The beneficiary cannot be changed after 2 years
CORRECT ANSWER: B) After the policy has been in force for a specified
period (usually 2 years), the insurer cannot contest the validity of the policy
based on misrepresentation
EXPERT RATIONALE: The incontestability clause protects the insured's beneficiaries by
limiting the insurer's ability to void the policy due to misrepresentation after the policy
has been in force for typically two years, except in cases of outright fraud.
QUESTION 7
What type of beneficiary designation CANNOT be changed without the
beneficiary's consent?
A) Contingent beneficiary
B) Tertiary beneficiary
C) Revocable beneficiary
D) Irrevocable beneficiary
E) Class beneficiary
CORRECT ANSWER: D) Irrevocable beneficiary
