PRIMERICA LIFE INSURANCE EXAM
Revised (2022/2023)
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the
insurance company that was not taxable. This year, she did not receive a check from the insurer. From
what type of insurer did the insured purchase the policy?
a. mutual
b. reciprocal
c. nonprofit service organization
d. stock (answer) A. mutual
funds not paid out after paying claims and other operating costs are returned to the policy owners in the
form of a dividend. if all funds are paid out, no dividends are paid;Following a career change, an insured
is no longer required to perform many physical activities, so he has implemented a program where he
walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his
diet. Which method of dealing with risk does this scenario describe?
a. retention
b. reduction
c. transfer
d. avoidance (answer) B. reduction
the insured's change in lifestyle and habits would likely reduce the chances of health problems;In
insurance, an offer is usually made when
a. an applicant submits an application to the insurer
b. the insurer approves the application and receives the initial premium
c. the agent hands the policy to the policyholder
,d. an agent explains a policy to a potential applicant (answer) A. an applicant submits an application to
the insurer
in insurance, the offer is usually made by the applicant in the form of an application. acceptance takes
place when an insurer's underwriter approves the application and issues a policy;the causes of loss
insured against in an insurance policy are known as
a. perils
b. losses
c. risks
d. hazards (answer) A. perils
perils are the causes of loss insured against in an insurance policy;what documentation grants express
authority to an agent?
a. agents contract with the principal
b. agents insurance license
c. fiduciary contract
d. state provisions (answer) A. agents contract with the principal
the principal grants authority to an agent through the agent's contract;which of the following best
describes an insurance company that has been formed under the laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign (answer) A. domestic
a company is domestic when doing business within the state in which it is incorporated;which of the
following factors is NOT considered by an underwriter when determining the premium rates for an
individual seeking insurance?
,a. medical history
b. sex
c. age
d. race (answer) D. race
age, medical history, and sex provide sound statistical date for determining the probability of loss. Race,
religion, sexual orientation, etc. are the factors that cannot be used because there is not sound statistical
data to show that they effect the probability of loss; therefore, they are considered to be
discriminatory;in insurance transactions, fiduciary responsibility means
a. handling insurer funds in a trust capacity
b. maintaining good credit record
c. being liable with respect to payment of claims
d. commingling premiums with agents personal funds (answer) A. handling insurer funds in a trust
capacity
an agents fiduciary responsibility includes handling insurer funds in a trust capacity;the authority
granted to an agent through the agent's contract is referred to as
a. absolute authority
b. express authority
c. apparent authority
d. implied authority (answer) B. express authority
express powers are written into the contract between the insurer and the agent;insurance policies are
not drawn up though negotiations, and an insured has little to say about its provisions. what contract
characteristic does this describe?
a. unilateral
b. conditional
, c. personal
d. adhesion (answer) D. adhesion
a contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the
policy as its written;which of the following insurers are owned by stockholders who have the usual rights
of ownership, including the right of voting?
a. reciprocal
b. fraternal
c. stock
d. mutual (answer) C. stock
only stock insurance companies are owned and controlled by stockholders;which of the following best
describes the concept that the insured pays a small amount of premium for a large amount of risk on the
part of the insurance company?
a. subrogation
b. warranty
c. aleatory
d. adhesion (answer) C. aleatory
an insurance contract is an aleatory contract in that it requires a relatively small amount of premium for
a large risk;When an insured makes truthful statements on the application for insurance and pays the
required premium, it is known as which of the following?
a. legal purpose
b. contract of adhesion
c. acceptance
d. consideration (answer) D. consideration
Revised (2022/2023)
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the
insurance company that was not taxable. This year, she did not receive a check from the insurer. From
what type of insurer did the insured purchase the policy?
a. mutual
b. reciprocal
c. nonprofit service organization
d. stock (answer) A. mutual
funds not paid out after paying claims and other operating costs are returned to the policy owners in the
form of a dividend. if all funds are paid out, no dividends are paid;Following a career change, an insured
is no longer required to perform many physical activities, so he has implemented a program where he
walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his
diet. Which method of dealing with risk does this scenario describe?
a. retention
b. reduction
c. transfer
d. avoidance (answer) B. reduction
the insured's change in lifestyle and habits would likely reduce the chances of health problems;In
insurance, an offer is usually made when
a. an applicant submits an application to the insurer
b. the insurer approves the application and receives the initial premium
c. the agent hands the policy to the policyholder
,d. an agent explains a policy to a potential applicant (answer) A. an applicant submits an application to
the insurer
in insurance, the offer is usually made by the applicant in the form of an application. acceptance takes
place when an insurer's underwriter approves the application and issues a policy;the causes of loss
insured against in an insurance policy are known as
a. perils
b. losses
c. risks
d. hazards (answer) A. perils
perils are the causes of loss insured against in an insurance policy;what documentation grants express
authority to an agent?
a. agents contract with the principal
b. agents insurance license
c. fiduciary contract
d. state provisions (answer) A. agents contract with the principal
the principal grants authority to an agent through the agent's contract;which of the following best
describes an insurance company that has been formed under the laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign (answer) A. domestic
a company is domestic when doing business within the state in which it is incorporated;which of the
following factors is NOT considered by an underwriter when determining the premium rates for an
individual seeking insurance?
,a. medical history
b. sex
c. age
d. race (answer) D. race
age, medical history, and sex provide sound statistical date for determining the probability of loss. Race,
religion, sexual orientation, etc. are the factors that cannot be used because there is not sound statistical
data to show that they effect the probability of loss; therefore, they are considered to be
discriminatory;in insurance transactions, fiduciary responsibility means
a. handling insurer funds in a trust capacity
b. maintaining good credit record
c. being liable with respect to payment of claims
d. commingling premiums with agents personal funds (answer) A. handling insurer funds in a trust
capacity
an agents fiduciary responsibility includes handling insurer funds in a trust capacity;the authority
granted to an agent through the agent's contract is referred to as
a. absolute authority
b. express authority
c. apparent authority
d. implied authority (answer) B. express authority
express powers are written into the contract between the insurer and the agent;insurance policies are
not drawn up though negotiations, and an insured has little to say about its provisions. what contract
characteristic does this describe?
a. unilateral
b. conditional
, c. personal
d. adhesion (answer) D. adhesion
a contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the
policy as its written;which of the following insurers are owned by stockholders who have the usual rights
of ownership, including the right of voting?
a. reciprocal
b. fraternal
c. stock
d. mutual (answer) C. stock
only stock insurance companies are owned and controlled by stockholders;which of the following best
describes the concept that the insured pays a small amount of premium for a large amount of risk on the
part of the insurance company?
a. subrogation
b. warranty
c. aleatory
d. adhesion (answer) C. aleatory
an insurance contract is an aleatory contract in that it requires a relatively small amount of premium for
a large risk;When an insured makes truthful statements on the application for insurance and pays the
required premium, it is known as which of the following?
a. legal purpose
b. contract of adhesion
c. acceptance
d. consideration (answer) D. consideration
