LIFE, ACCIDENT & SICKNESS AGENT EXAM (12-GA-05) 200
COMPLETE PRACTICE QUESTIONS WITH VERIFIED ANSWERS &
RATIONALES| Georgia Insurance Principles, Policy Types,
Laws, Ethics & Scenarios
TABLE OF CONTENTS
Section Title Question Numbers
1 Insurance Principles & Concepts 1 – 40
2 Life Insurance Policy Types & Provisions 41 – 90
3 Accident & Sickness (Health) Insurance 91 – 130
4 Georgia Laws, Licensing & Regulations 131 – 170
5 Ethics, Annuities, Retirement Plans & Scenarios 171 – 200
SECTION 1: INSURANCE PRINCIPLES & CONCEPTS (Questions 1–40)
1. The concept that a large number of similar exposures allows insurers to
predict losses more accurately is called:
A) Law of Large Numbers
B) Indemnity
C) Utmost Good Faith
D) Subrogation
Answer: A
Rationale: The Law of Large Numbers states that the larger the number of
individual risks pooled, the more predictable actual losses become relative to
expected losses.
2. Which of the following is NOT a requirement for an insurable risk?
A) Definite and measurable loss
B) Intentional loss
,C) Large number of similar exposure units
D) Affordable premium
Answer: B
Rationale: Intentional losses are not insurable because they are predictable and
controllable by the insured, making them a moral hazard.
3. An agent tells a client "This policy is exactly like whole life but cheaper." This
is an example of:
A) Legal comparison
B) Misrepresentation
C) Twisting
D) Rebating
Answer: B
Rationale: Misrepresentation is making false, misleading, or incomplete
statements to induce a purchase. "Exactly like...but cheaper" is false unless it's a
specifically defined product.
4. The term "consideration" in an insurance contract consists of:
A) Only the premium paid
B) Only the application
C) The application and the premium
D) The agent's commission
Answer: C
Rationale: Consideration is the binding element. The applicant provides the
application (representations) and the premium; the insurer promises to pay a
covered claim.
5. Which type of hazard is a physical condition that increases the chance of loss?
A) Moral hazard
B) Morale hazard
C) Physical hazard
D) Legal hazard
Answer: C
Rationale: Physical hazards are tangible conditions like faulty wiring, icy roads, or
a known medical condition.
,6. Under the principle of indemnity, the insured should:
A) Profit from a loss
B) Be restored to their approximate financial condition before the loss
C) Receive a penalty for filing a claim
D) Always receive the full face amount
Answer: B
Rationale: Indemnity prevents unjust enrichment. Life insurance is an exception
(valued policy), but accident/sickness pays actual losses or specified benefits.
7. The insurer's right to pursue a third party responsible for a loss after paying
the insured is called:
A) Assignment
B) Subrogation
C) Apportionment
D) Reinstatement
Answer: B
Rationale: Subrogation allows the insurer to "step into the shoes" of the insured to
recover paid damages from a negligent party.
8. An insurance contract is considered "aleatory" because:
A) Only one party makes a promise
B) The values exchanged may be unequal
C) It is prepared by the insurer
D) It requires a condition to be met
Answer: B
Rationale: Aleatory means the performance depends on an uncertain event. A
small premium could result in a large benefit, or no benefit if no loss occurs.
9. Which statement about a "conditional" insurance contract is TRUE?
A) Both parties' performance is absolute
B) Insurer's performance depends on the occurrence of a covered loss
C) The insured can never cancel
D) Premiums are refundable at any time
, Answer: B
Rationale: Insurance is conditional because the insurer only pays if certain
conditions (e.g., death, accident, illness) are met.
10. An insured intentionally sets fire to his own business. The insurer denies the
claim. This is due to:
A) Public policy
B) Lack of offer and acceptance
C) Failure of consideration
D) Statute of limitations
Answer: A
Rationale: Public policy prohibits indemnifying someone for intentionally caused
losses, as it would encourage fraud and harm society.
11. A statement made by an applicant that is guaranteed to be true in every
respect is a:
A) Representation
B) Warranty
C) Concealment
D) Waiver
Answer: B
Rationale: A warranty is a statement that becomes part of the contract and must
be literally true; a representation is believed to be true to the best of the
applicant's knowledge.
12. An insurer is estopped from denying coverage if it:
A) Accepts premiums after learning of a policy defect
B) Discovers fraud after the contestability period
C) Requires a medical exam
D) Issues a conditional receipt
Answer: A
Rationale: Estoppel prevents an insurer from asserting a right if its actions (e.g.,
accepting premiums with knowledge of a problem) have led the insured to rely to
their detriment.
COMPLETE PRACTICE QUESTIONS WITH VERIFIED ANSWERS &
RATIONALES| Georgia Insurance Principles, Policy Types,
Laws, Ethics & Scenarios
TABLE OF CONTENTS
Section Title Question Numbers
1 Insurance Principles & Concepts 1 – 40
2 Life Insurance Policy Types & Provisions 41 – 90
3 Accident & Sickness (Health) Insurance 91 – 130
4 Georgia Laws, Licensing & Regulations 131 – 170
5 Ethics, Annuities, Retirement Plans & Scenarios 171 – 200
SECTION 1: INSURANCE PRINCIPLES & CONCEPTS (Questions 1–40)
1. The concept that a large number of similar exposures allows insurers to
predict losses more accurately is called:
A) Law of Large Numbers
B) Indemnity
C) Utmost Good Faith
D) Subrogation
Answer: A
Rationale: The Law of Large Numbers states that the larger the number of
individual risks pooled, the more predictable actual losses become relative to
expected losses.
2. Which of the following is NOT a requirement for an insurable risk?
A) Definite and measurable loss
B) Intentional loss
,C) Large number of similar exposure units
D) Affordable premium
Answer: B
Rationale: Intentional losses are not insurable because they are predictable and
controllable by the insured, making them a moral hazard.
3. An agent tells a client "This policy is exactly like whole life but cheaper." This
is an example of:
A) Legal comparison
B) Misrepresentation
C) Twisting
D) Rebating
Answer: B
Rationale: Misrepresentation is making false, misleading, or incomplete
statements to induce a purchase. "Exactly like...but cheaper" is false unless it's a
specifically defined product.
4. The term "consideration" in an insurance contract consists of:
A) Only the premium paid
B) Only the application
C) The application and the premium
D) The agent's commission
Answer: C
Rationale: Consideration is the binding element. The applicant provides the
application (representations) and the premium; the insurer promises to pay a
covered claim.
5. Which type of hazard is a physical condition that increases the chance of loss?
A) Moral hazard
B) Morale hazard
C) Physical hazard
D) Legal hazard
Answer: C
Rationale: Physical hazards are tangible conditions like faulty wiring, icy roads, or
a known medical condition.
,6. Under the principle of indemnity, the insured should:
A) Profit from a loss
B) Be restored to their approximate financial condition before the loss
C) Receive a penalty for filing a claim
D) Always receive the full face amount
Answer: B
Rationale: Indemnity prevents unjust enrichment. Life insurance is an exception
(valued policy), but accident/sickness pays actual losses or specified benefits.
7. The insurer's right to pursue a third party responsible for a loss after paying
the insured is called:
A) Assignment
B) Subrogation
C) Apportionment
D) Reinstatement
Answer: B
Rationale: Subrogation allows the insurer to "step into the shoes" of the insured to
recover paid damages from a negligent party.
8. An insurance contract is considered "aleatory" because:
A) Only one party makes a promise
B) The values exchanged may be unequal
C) It is prepared by the insurer
D) It requires a condition to be met
Answer: B
Rationale: Aleatory means the performance depends on an uncertain event. A
small premium could result in a large benefit, or no benefit if no loss occurs.
9. Which statement about a "conditional" insurance contract is TRUE?
A) Both parties' performance is absolute
B) Insurer's performance depends on the occurrence of a covered loss
C) The insured can never cancel
D) Premiums are refundable at any time
, Answer: B
Rationale: Insurance is conditional because the insurer only pays if certain
conditions (e.g., death, accident, illness) are met.
10. An insured intentionally sets fire to his own business. The insurer denies the
claim. This is due to:
A) Public policy
B) Lack of offer and acceptance
C) Failure of consideration
D) Statute of limitations
Answer: A
Rationale: Public policy prohibits indemnifying someone for intentionally caused
losses, as it would encourage fraud and harm society.
11. A statement made by an applicant that is guaranteed to be true in every
respect is a:
A) Representation
B) Warranty
C) Concealment
D) Waiver
Answer: B
Rationale: A warranty is a statement that becomes part of the contract and must
be literally true; a representation is believed to be true to the best of the
applicant's knowledge.
12. An insurer is estopped from denying coverage if it:
A) Accepts premiums after learning of a policy defect
B) Discovers fraud after the contestability period
C) Requires a medical exam
D) Issues a conditional receipt
Answer: A
Rationale: Estoppel prevents an insurer from asserting a right if its actions (e.g.,
accepting premiums with knowledge of a problem) have led the insured to rely to
their detriment.
