Primerica - Life Insurance Exam Correctively Answered
What is insurance? -Correct Ans-Transfer of the possibility of loss (risk) to an insurance
company.
What is a risk? -Correct Ans-The uncertainty of financial loss
There are two types of loss -Correct Ans-Pure and Speculative
Which type of loss is insurable? -Correct Ans-Pure
Why is Pure loss insurable? -Correct Ans-Loss must be financial and uncertain. No
financial gain can occur.
What causes loss? -Correct Ans-Peril; such as fire, accident or flood
What causes a peril? -Correct Ans-A hazard
What is a hazard? -Correct Ans-Increases the likelihood of a loss; such as smoking
What is the concept called, that predicts the appropriate number of deaths that should
occur within a similar group
of people (exposure) within a given period of time? -Correct Ans-Law of Large Numbers
What is adverse selection? -Correct Ans-People in bad health keep their policy in force
longer than people in good health
,As an agent, you are a legal representative of the ______________. -Correct Ans-
company
The person who pays for the policy of insurance is the -Correct Ans-policy owner
The _____________ is the person who receives the benefits from the insurance policy -
Correct Ans-beneficiary
The person covered by the insurance policy is the ____________. -Correct Ans-insured
The insurance company is the ___________. -Correct Ans-insurer
To buy insurance, the policyowner must have ______________ in the insured at the
_________________________________________________. -Correct Ans-insurable
interest; time of purchase but not at
time of insured's death.
The 5 recognizable areas of insurable interest are ___________. -Correct Ans-1. your
own life
2. family members
3. business partners
4. key employee
5.financial obligation.
What is person called who holds a position of special trust and confidence? -Correct
Ans-Fiduciary
, Waiver vs. Estoppel -Correct Ans-Waiver is when you voluntarily give up your legal right.
Estoppel is when you are denied the right to enforce a legal right that you have
previously given up. Estoppel AKA The Loss of Defense
What are the business uses of life insurance? -Correct Ans-1. Key Employee
2. Buy and Sell Agreement
3. Cross Purchase Plan
4. Split Dollar Plan
Key Employee -Correct Ans-Company is owner and Beneficiary
Employee is Insured Premium NOT tax deductible to Company Third Party Ownership
Buy and Sell Agreement -Correct Ans-NOT INSURANCE - A legal document that states
WHO may purchase a deceased partners share of the business and for HOW MUCH
MONEY
Life Insurance can be used to fund a Buy and Sell Agreement
Drawn up by an Attorney
Cross Purchase Plan -Correct Ans-Take the Company Value and divide by number of
Owners Each Owner buys a policy on the other Owners, naming himself as beneficiary.
Split Dollar Plan -Correct Ans-Employee and Owner share in Premium and DB Third Party
Ownership
What is meant by third party ownership -Correct Ans-Policy is owned by someone other
than the Insured.
What is insurance? -Correct Ans-Transfer of the possibility of loss (risk) to an insurance
company.
What is a risk? -Correct Ans-The uncertainty of financial loss
There are two types of loss -Correct Ans-Pure and Speculative
Which type of loss is insurable? -Correct Ans-Pure
Why is Pure loss insurable? -Correct Ans-Loss must be financial and uncertain. No
financial gain can occur.
What causes loss? -Correct Ans-Peril; such as fire, accident or flood
What causes a peril? -Correct Ans-A hazard
What is a hazard? -Correct Ans-Increases the likelihood of a loss; such as smoking
What is the concept called, that predicts the appropriate number of deaths that should
occur within a similar group
of people (exposure) within a given period of time? -Correct Ans-Law of Large Numbers
What is adverse selection? -Correct Ans-People in bad health keep their policy in force
longer than people in good health
,As an agent, you are a legal representative of the ______________. -Correct Ans-
company
The person who pays for the policy of insurance is the -Correct Ans-policy owner
The _____________ is the person who receives the benefits from the insurance policy -
Correct Ans-beneficiary
The person covered by the insurance policy is the ____________. -Correct Ans-insured
The insurance company is the ___________. -Correct Ans-insurer
To buy insurance, the policyowner must have ______________ in the insured at the
_________________________________________________. -Correct Ans-insurable
interest; time of purchase but not at
time of insured's death.
The 5 recognizable areas of insurable interest are ___________. -Correct Ans-1. your
own life
2. family members
3. business partners
4. key employee
5.financial obligation.
What is person called who holds a position of special trust and confidence? -Correct
Ans-Fiduciary
, Waiver vs. Estoppel -Correct Ans-Waiver is when you voluntarily give up your legal right.
Estoppel is when you are denied the right to enforce a legal right that you have
previously given up. Estoppel AKA The Loss of Defense
What are the business uses of life insurance? -Correct Ans-1. Key Employee
2. Buy and Sell Agreement
3. Cross Purchase Plan
4. Split Dollar Plan
Key Employee -Correct Ans-Company is owner and Beneficiary
Employee is Insured Premium NOT tax deductible to Company Third Party Ownership
Buy and Sell Agreement -Correct Ans-NOT INSURANCE - A legal document that states
WHO may purchase a deceased partners share of the business and for HOW MUCH
MONEY
Life Insurance can be used to fund a Buy and Sell Agreement
Drawn up by an Attorney
Cross Purchase Plan -Correct Ans-Take the Company Value and divide by number of
Owners Each Owner buys a policy on the other Owners, naming himself as beneficiary.
Split Dollar Plan -Correct Ans-Employee and Owner share in Premium and DB Third Party
Ownership
What is meant by third party ownership -Correct Ans-Policy is owned by someone other
than the Insured.
