2025 PA LIFE INSURANCE TEST 290 QUESTIONS &
CORRECT ANSWERS LATEST EXAM
Karen is a producer who has obtained personal information about a client without
having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is
the minimum penalty for this? - ANSWER-$10,000 or up to one year in jail
A type of insurer that is owned by its policyowners is called - ANSWER-Mutual
insurer
What is considered to be the primary reason for buying life insurance? - ANSWER-
Provide death benefits
Fraternal Benefit Society has each of the following characteristics EXCEPT -
ANSWER-Exist for profit (FBS is a non profit entity, it is incorporated, without
capital stock, and exists for the benefit of its members)
What kind of life insurance policy issued by a mutual insurer provides a return of
divisible surplus? - ANSWER-participating life insurance policy (A mutual insurer
issues life insurance policies that provide a return of divisible surplus.)
An insurer's ability to make unpredictable payouts to policyowners is called -
ANSWER-liquidity
,An insurer's claim settlement practices are regulated by the - ANSWER-State
insurance departments
A nonparticipating company is sometimes called a - ANSWER-stock insurer
Which of the following is not considered advertising?
A.) a rating from a rating service company such as A.M. best
B.) an illustration
C.) A sales presentation
D.)Direct mailing from an agency - ANSWER-A.) a rating from a rating service
company such as A.M. best
A nonparticipating policy will - ANSWER-not pay dividends
Insurance represents the process of risk - ANSWER-transference
A ______ is considered to be an event or condition that increases the probability
of an insureds loss? - ANSWER-Hazard
Insurance companies determine risk exposure by doing what? - ANSWER-Law of
Large Numbers (safety/predictability in large groups) and risk pooling
All of the following are examples of pure risk except?
A.) Losing money at a casino
,B.) Injured while playing football
C.) Falling and breaking a hip
D.) Jewelry stolen during home robbery - ANSWER-A.) losing money at a casino,
this is speculative risk
People with higher loss exposure have the tendency to purchase insurance more
often than those at average risk. This is called - ANSWER-adverse selection
How do insurers predict the increase of individual risks? - ANSWER-law of large
numbers
What is known as the immediate specific event causing loss and giving rise to risk?
- ANSWER-peril
The cause of a loss is called a - ANSWER-peril
An example of risk sharing would be - ANSWER-Doctors pooling their money to
cover malpractice exposures
An individual who removes the risk of losing money in the stock market by never
purchasing stock is said to be engaging in - ANSWER-Risk avoidance
Give an example of a consideration - ANSWER-A paid premium
What makes an insurance policy a unilateral contract? - ANSWER-Only the insurer
is legally bound
, What contract element is insurable interest a component of
- Competent parties
- Offer and acceptance
-Consideration
- Legal Purpose - ANSWER-- Legal Purpose
In an insurance contract, the element that shows each party is giving something
of value is called - ANSWER-consideration
In order for a contract to be valid, it must - ANSWER-contain an offer and
acceptance, consideration, legal purpose, and competent parties
All of the following are elements of an insurance policy except - ANSWER-claim
forms
According to the principle of utmost good faith, the insured will answer questions
on the application to the best of their knowledge and pay the required premium,
while the insurer will deal fairly with the insured and - ANSWER-it's promises
made
Insurable interest does NOT occur in which of the following relationships? -
ANSWER-Business owner and business client
Ambiguities in an insurance policy are always resolved in favor of the - ANSWER-
insured
CORRECT ANSWERS LATEST EXAM
Karen is a producer who has obtained personal information about a client without
having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is
the minimum penalty for this? - ANSWER-$10,000 or up to one year in jail
A type of insurer that is owned by its policyowners is called - ANSWER-Mutual
insurer
What is considered to be the primary reason for buying life insurance? - ANSWER-
Provide death benefits
Fraternal Benefit Society has each of the following characteristics EXCEPT -
ANSWER-Exist for profit (FBS is a non profit entity, it is incorporated, without
capital stock, and exists for the benefit of its members)
What kind of life insurance policy issued by a mutual insurer provides a return of
divisible surplus? - ANSWER-participating life insurance policy (A mutual insurer
issues life insurance policies that provide a return of divisible surplus.)
An insurer's ability to make unpredictable payouts to policyowners is called -
ANSWER-liquidity
,An insurer's claim settlement practices are regulated by the - ANSWER-State
insurance departments
A nonparticipating company is sometimes called a - ANSWER-stock insurer
Which of the following is not considered advertising?
A.) a rating from a rating service company such as A.M. best
B.) an illustration
C.) A sales presentation
D.)Direct mailing from an agency - ANSWER-A.) a rating from a rating service
company such as A.M. best
A nonparticipating policy will - ANSWER-not pay dividends
Insurance represents the process of risk - ANSWER-transference
A ______ is considered to be an event or condition that increases the probability
of an insureds loss? - ANSWER-Hazard
Insurance companies determine risk exposure by doing what? - ANSWER-Law of
Large Numbers (safety/predictability in large groups) and risk pooling
All of the following are examples of pure risk except?
A.) Losing money at a casino
,B.) Injured while playing football
C.) Falling and breaking a hip
D.) Jewelry stolen during home robbery - ANSWER-A.) losing money at a casino,
this is speculative risk
People with higher loss exposure have the tendency to purchase insurance more
often than those at average risk. This is called - ANSWER-adverse selection
How do insurers predict the increase of individual risks? - ANSWER-law of large
numbers
What is known as the immediate specific event causing loss and giving rise to risk?
- ANSWER-peril
The cause of a loss is called a - ANSWER-peril
An example of risk sharing would be - ANSWER-Doctors pooling their money to
cover malpractice exposures
An individual who removes the risk of losing money in the stock market by never
purchasing stock is said to be engaging in - ANSWER-Risk avoidance
Give an example of a consideration - ANSWER-A paid premium
What makes an insurance policy a unilateral contract? - ANSWER-Only the insurer
is legally bound
, What contract element is insurable interest a component of
- Competent parties
- Offer and acceptance
-Consideration
- Legal Purpose - ANSWER-- Legal Purpose
In an insurance contract, the element that shows each party is giving something
of value is called - ANSWER-consideration
In order for a contract to be valid, it must - ANSWER-contain an offer and
acceptance, consideration, legal purpose, and competent parties
All of the following are elements of an insurance policy except - ANSWER-claim
forms
According to the principle of utmost good faith, the insured will answer questions
on the application to the best of their knowledge and pay the required premium,
while the insurer will deal fairly with the insured and - ANSWER-it's promises
made
Insurable interest does NOT occur in which of the following relationships? -
ANSWER-Business owner and business client
Ambiguities in an insurance policy are always resolved in favor of the - ANSWER-
insured
