CA LIFE EXAM – PSI QUESTIONS
ANSWERS
A-participating-company-is-also-referred-to-as-which-type-of-insurer?---ans-✔✔Mutual-
insurer
An-insurer-owned-by-its-policyholders,-is-called-a---ans-✔✔Mutual-insurer
What-is-a-participating-life-insurance-policy?---ans-✔✔Contract-that-allows-the-
policyowner-to-receive-a-share-of-surplus-in-the-form-of-policy-dividends
An-insurer-enter-into-a-contract-with-a-third-party-to-ensure-itself-against-losses-from-
insurance-policies-it-issues.-What-is-this-agreement-called?---ans-✔✔Reinsurance
John-owns-an-insurance-company-that-gives-him-the-right-to-share-and-then-sure-surplus.-
What-kind-of-policy-is-this?---ans-✔✔Participating
Which-of-the-following-is-not-a-characteristic-of-reinsurance?---ans-✔✔Increases-the-
unearned-premium-reserved
Which-of-the-following-is-not-a-benefit-of-insurance?---ans-✔✔Losses-due-to-fraud-are-
eliminated
When-a-mutual-insurer-becomes-a-stock-company,-the-process-is-called---ans-
✔✔Demutualization
Which-of-the-following-is-a-contract-that-involves-one-party-which-indemnifies-another-one-
a-loss-arises-from-an-unknown-event?---ans-✔✔Insurance-policy
Which-of-the-following-is-an-insurer-established-by-a-parent-company's-loss-exposure's?---
ans-✔✔Captive-insurers
Which-of-the-following-is-not-considered-to-be-a-definition-for-the-term-"loss"?---ans-
✔✔Probability-that-an-event-will-occur
Which-of-the-following-is-not-considered-a-definition-of-a-risk?---ans-✔✔The-cause-of-loss
,Which-of-the-following-best-describes-the-statement;-"-the-more-times,-and-event-is-
repeated,-the-more-predictable-the-outcome-becomes"?---ans-✔✔Law-of-large-numbers
Which-of-the-following-would-not-be-accomplished-with-the-purchase-of-an-insurance-
policy?---ans-✔✔Risk-is-eliminated
Which-of-the-following-is-a-situation-where-there-is-a-possibility-of-either-a-loss-or-gain?---
ans-✔✔Speculative-risk
Which-of-the-following-is-any-situation-that-presents-the-possibility-of-a-loss?---ans-
✔✔Loss
An-insurer-having-a-large-number-of-similar-exposure-units-is-considered-important-
because:---ans-✔✔the-greater-the-number-insured,-the-more-accurately-that-is-her-can-
predict-losses-&-set-appropriate-premiums
Which-of-these-statements-correctly-describes-risks?---ans-✔✔Pure-risk-is-the-only-
insurable-risk
Which-type-of-risk-is-gambling?---ans-✔✔Speculative-risk
Moral-hazard-is-described-as-the:---ans-✔✔increased-chance-of-a-loss-because-of-an-
insured's-dishonest-tendencies
All-of-the-following-circumstances-must-be-met-for-los-retention-to-be-an-effective,-risk-
management-technique,-except---ans-✔✔Probability-of-loss-is-unknown
All-of-the-following-circumstances-must-be-met-for-lost-attention-to-be-an-effective-risk-
management-technique,-except---ans-✔✔Probability-of-loss-is-unknown
After-a-policy-has-lapsed,-which-provision-allows-the-insurer-to-continue-coverage---ans-
✔✔Reinstatement-provision
In-a-life-insurance-policy,-the-entire-contract-consists-of---ans-✔✔policy-and-attached-
application
Which-policy-provision-protects-the-policy-owner-from-unintentional-lapse-of-the-
contract?---ans-✔✔Grace-period
Which-of-the-following-is-not-a-common-life-insurance-policy-later?---ans-✔✔Extended-
term
What-an-accidental-death-benefit-is-added-to-a-whole-life-policy,-how-does-this-affect-the-
policies-cash-value?---ans-✔✔Policies,-cash-value-is-not-affected
, A-life-insurance-policy-can-be-surrendered-for-its-cash-value-under-which-policy-
provision?---ans-✔✔Nonforfeiture-options
Which-of-the-following-does-a-policy-owner-not-have-the-right-to-change?---ans-
✔✔Dividend-schedule
Which-statement-is-true-regarding-policy-dividends?---ans-✔✔A-dividend-option-is-
selected-by-the-insured-at-the-time-of-the-policy-purchase
What-does-the-grace-period-allow-a-life-insurance-policy-to-do?---ans-✔✔Make-a-
premium-payment-after-the-due-date-without-any-loss-of-coverage
If-an-insured-dies-because-of-an-accident,-which-type-of-life-insurance-rider-will-provide-
additional-coverage?---ans-✔✔Accidental-death-rider
How-is-a-life-insurance-policy-dividend-legally-defined?---ans-✔✔A-return-of-excess-
premium-and-non-taxable
An-insurer-can-be-protected-from-adverse-selection-by-which-policy-provision?---ans-
✔✔Suicide-clause
What-does-the-guaranteed-insurability-option-allow-and-insured-to-do?---ans-
✔✔Purchase-additional-coverage-with-no-evidence-of-insurability-required
How-are-the-acts-of-war-and-aviation-treated-under-a-group-life-insurance-policy?---ans-
✔✔Policy-exclusion
Which-of-these-is-not-a-valid-policy-dividend-option?---ans-✔✔Monthly-income-payments
True-statement-of-policy-dividends?---ans-✔✔A-dividend-option-is-selected-by-the-insured-
at-the-time-of-the-policy-purchase
The-probability-of-death,-listed-by-year,-is-demonstrated-in---ans-✔✔Mortality-tables
Which-of-the-following-describes-the-number-of-deaths-in-a-year-compared-to-the-number-
of-people-in-a-select-group?---ans-✔✔Mortality-rate
Which-of-the-following-is-not-a-life-insurance-settlement-option?---ans-✔✔Extended-term-
option
An-annuity-which-is-backed-by-a-life-insurer's-separate-account-is-called-a(n)---ans-
✔✔Variable-annuity
What-is-a-common-reason-people-purchase-an-annuity?---ans-✔✔To-protect-against-the-
risk-of-outliving-their-financial-resources
ANSWERS
A-participating-company-is-also-referred-to-as-which-type-of-insurer?---ans-✔✔Mutual-
insurer
An-insurer-owned-by-its-policyholders,-is-called-a---ans-✔✔Mutual-insurer
What-is-a-participating-life-insurance-policy?---ans-✔✔Contract-that-allows-the-
policyowner-to-receive-a-share-of-surplus-in-the-form-of-policy-dividends
An-insurer-enter-into-a-contract-with-a-third-party-to-ensure-itself-against-losses-from-
insurance-policies-it-issues.-What-is-this-agreement-called?---ans-✔✔Reinsurance
John-owns-an-insurance-company-that-gives-him-the-right-to-share-and-then-sure-surplus.-
What-kind-of-policy-is-this?---ans-✔✔Participating
Which-of-the-following-is-not-a-characteristic-of-reinsurance?---ans-✔✔Increases-the-
unearned-premium-reserved
Which-of-the-following-is-not-a-benefit-of-insurance?---ans-✔✔Losses-due-to-fraud-are-
eliminated
When-a-mutual-insurer-becomes-a-stock-company,-the-process-is-called---ans-
✔✔Demutualization
Which-of-the-following-is-a-contract-that-involves-one-party-which-indemnifies-another-one-
a-loss-arises-from-an-unknown-event?---ans-✔✔Insurance-policy
Which-of-the-following-is-an-insurer-established-by-a-parent-company's-loss-exposure's?---
ans-✔✔Captive-insurers
Which-of-the-following-is-not-considered-to-be-a-definition-for-the-term-"loss"?---ans-
✔✔Probability-that-an-event-will-occur
Which-of-the-following-is-not-considered-a-definition-of-a-risk?---ans-✔✔The-cause-of-loss
,Which-of-the-following-best-describes-the-statement;-"-the-more-times,-and-event-is-
repeated,-the-more-predictable-the-outcome-becomes"?---ans-✔✔Law-of-large-numbers
Which-of-the-following-would-not-be-accomplished-with-the-purchase-of-an-insurance-
policy?---ans-✔✔Risk-is-eliminated
Which-of-the-following-is-a-situation-where-there-is-a-possibility-of-either-a-loss-or-gain?---
ans-✔✔Speculative-risk
Which-of-the-following-is-any-situation-that-presents-the-possibility-of-a-loss?---ans-
✔✔Loss
An-insurer-having-a-large-number-of-similar-exposure-units-is-considered-important-
because:---ans-✔✔the-greater-the-number-insured,-the-more-accurately-that-is-her-can-
predict-losses-&-set-appropriate-premiums
Which-of-these-statements-correctly-describes-risks?---ans-✔✔Pure-risk-is-the-only-
insurable-risk
Which-type-of-risk-is-gambling?---ans-✔✔Speculative-risk
Moral-hazard-is-described-as-the:---ans-✔✔increased-chance-of-a-loss-because-of-an-
insured's-dishonest-tendencies
All-of-the-following-circumstances-must-be-met-for-los-retention-to-be-an-effective,-risk-
management-technique,-except---ans-✔✔Probability-of-loss-is-unknown
All-of-the-following-circumstances-must-be-met-for-lost-attention-to-be-an-effective-risk-
management-technique,-except---ans-✔✔Probability-of-loss-is-unknown
After-a-policy-has-lapsed,-which-provision-allows-the-insurer-to-continue-coverage---ans-
✔✔Reinstatement-provision
In-a-life-insurance-policy,-the-entire-contract-consists-of---ans-✔✔policy-and-attached-
application
Which-policy-provision-protects-the-policy-owner-from-unintentional-lapse-of-the-
contract?---ans-✔✔Grace-period
Which-of-the-following-is-not-a-common-life-insurance-policy-later?---ans-✔✔Extended-
term
What-an-accidental-death-benefit-is-added-to-a-whole-life-policy,-how-does-this-affect-the-
policies-cash-value?---ans-✔✔Policies,-cash-value-is-not-affected
, A-life-insurance-policy-can-be-surrendered-for-its-cash-value-under-which-policy-
provision?---ans-✔✔Nonforfeiture-options
Which-of-the-following-does-a-policy-owner-not-have-the-right-to-change?---ans-
✔✔Dividend-schedule
Which-statement-is-true-regarding-policy-dividends?---ans-✔✔A-dividend-option-is-
selected-by-the-insured-at-the-time-of-the-policy-purchase
What-does-the-grace-period-allow-a-life-insurance-policy-to-do?---ans-✔✔Make-a-
premium-payment-after-the-due-date-without-any-loss-of-coverage
If-an-insured-dies-because-of-an-accident,-which-type-of-life-insurance-rider-will-provide-
additional-coverage?---ans-✔✔Accidental-death-rider
How-is-a-life-insurance-policy-dividend-legally-defined?---ans-✔✔A-return-of-excess-
premium-and-non-taxable
An-insurer-can-be-protected-from-adverse-selection-by-which-policy-provision?---ans-
✔✔Suicide-clause
What-does-the-guaranteed-insurability-option-allow-and-insured-to-do?---ans-
✔✔Purchase-additional-coverage-with-no-evidence-of-insurability-required
How-are-the-acts-of-war-and-aviation-treated-under-a-group-life-insurance-policy?---ans-
✔✔Policy-exclusion
Which-of-these-is-not-a-valid-policy-dividend-option?---ans-✔✔Monthly-income-payments
True-statement-of-policy-dividends?---ans-✔✔A-dividend-option-is-selected-by-the-insured-
at-the-time-of-the-policy-purchase
The-probability-of-death,-listed-by-year,-is-demonstrated-in---ans-✔✔Mortality-tables
Which-of-the-following-describes-the-number-of-deaths-in-a-year-compared-to-the-number-
of-people-in-a-select-group?---ans-✔✔Mortality-rate
Which-of-the-following-is-not-a-life-insurance-settlement-option?---ans-✔✔Extended-term-
option
An-annuity-which-is-backed-by-a-life-insurer's-separate-account-is-called-a(n)---ans-
✔✔Variable-annuity
What-is-a-common-reason-people-purchase-an-annuity?---ans-✔✔To-protect-against-the-
risk-of-outliving-their-financial-resources
