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VIRGINIA LIFE AND HEALTH FINAL EXAM
|ORIGINAL 220Qs&As|A+GRADE ASSURED
1. The principle that an insured should not profit from a loss
but should be restored to the same financial position as before
the loss is called:
A) Indemnity
B) Insurable interest
C) Utmost good faith
D) Subrogation
Answer: A – Indemnity prevents unjust enrichment.
Rationale: Insurance is designed to compensate for loss, not to
provide profit. This principle applies to property and casualty
but not to life insurance (which pays a stated amount).
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2. Which of the following is NOT a requirement for an
insurable interest in life insurance?
A) The policyowner must expect to suffer a financial loss at the
insured’s death.
B) The beneficiary must have a close family relationship.
C) The insurable interest must exist at the time of application.
D) Insurable interest is required only at the inception of the
policy.
Answer: B – Beneficiary does not need to have an insurable
interest. The policyowner must have insurable interest in the
insured at the time of application.
Rationale: Virginia law follows the general rule: insurable interest
exists between family members, business partners, or creditors.
3. The term “aleatory contract” in insurance means:
A) The contract is one-sided.
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B) The values exchanged may be unequal.
C) The contract is voidable.
D) The contract is unilateral.
Answer: B – Aleatory contracts exchange unequal values (e.g.,
small premium for large potential benefit).
Rationale: Life insurance is aleatory because the premium paid
may be far less than the death benefit, depending on when
death occurs.
4. Which of the following is an example of a pure risk?
A) Investing in the stock market.
B) Starting a new business.
C) The possibility of dying prematurely.
D) Gambling at a casino.
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Answer: C – Pure risk involves only the chance of loss (no chance
of gain). Speculative risk has potential for gain or loss.
Rationale: Insurance deals with pure risks.
5. Under Virginia law, the “free look” period for a life
insurance policy is:
A) 7 days
B) 10 days
C) 20 days
D) 30 days
Answer: B – 10 days for life insurance; for annuity contracts, the
free look period is 10 days as well (but may be longer for
seniors).
Rationale: The free look period allows the insured to return the
policy for a full refund.
VIRGINIA LIFE AND HEALTH FINAL EXAM
|ORIGINAL 220Qs&As|A+GRADE ASSURED
1. The principle that an insured should not profit from a loss
but should be restored to the same financial position as before
the loss is called:
A) Indemnity
B) Insurable interest
C) Utmost good faith
D) Subrogation
Answer: A – Indemnity prevents unjust enrichment.
Rationale: Insurance is designed to compensate for loss, not to
provide profit. This principle applies to property and casualty
but not to life insurance (which pays a stated amount).
,Page 2 of 137
2. Which of the following is NOT a requirement for an
insurable interest in life insurance?
A) The policyowner must expect to suffer a financial loss at the
insured’s death.
B) The beneficiary must have a close family relationship.
C) The insurable interest must exist at the time of application.
D) Insurable interest is required only at the inception of the
policy.
Answer: B – Beneficiary does not need to have an insurable
interest. The policyowner must have insurable interest in the
insured at the time of application.
Rationale: Virginia law follows the general rule: insurable interest
exists between family members, business partners, or creditors.
3. The term “aleatory contract” in insurance means:
A) The contract is one-sided.
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B) The values exchanged may be unequal.
C) The contract is voidable.
D) The contract is unilateral.
Answer: B – Aleatory contracts exchange unequal values (e.g.,
small premium for large potential benefit).
Rationale: Life insurance is aleatory because the premium paid
may be far less than the death benefit, depending on when
death occurs.
4. Which of the following is an example of a pure risk?
A) Investing in the stock market.
B) Starting a new business.
C) The possibility of dying prematurely.
D) Gambling at a casino.
, Page 4 of 137
Answer: C – Pure risk involves only the chance of loss (no chance
of gain). Speculative risk has potential for gain or loss.
Rationale: Insurance deals with pure risks.
5. Under Virginia law, the “free look” period for a life
insurance policy is:
A) 7 days
B) 10 days
C) 20 days
D) 30 days
Answer: B – 10 days for life insurance; for annuity contracts, the
free look period is 10 days as well (but may be longer for
seniors).
Rationale: The free look period allows the insured to return the
policy for a full refund.
