XCEL CHAPTER 5 PRACTICE SCRIPT
CERTIFICATION 2026 QUESTIONS WITH
VERIFIED SOLUTIONS GRADED A+
⩥ What is considered to be the primary reason for buying life insurance?
Answer: Provide death benefits
⩥ Which of the following is NOT considered advertising? Answer: A
rating from a rating service company, such as A.M. Best
⩥ A plan in which an employer pays insurance benefits from a fund
derived from the employer's current revenues is called Answer: A self-
funded plan
⩥ What kind of life insurance policy issued by a mutual insurer provides
a return of divisible surplus? Answer: Participating life insurance policy
⩥ Why are dividends from a mutual insurer not subject to taxation?
Answer: Because dividends are considered to be a return of premium
⩥ A type of insurer that is owned by its policyowners is called Answer:
Mutual
,⩥ A nonparticipating company is sometimes called a(n) Answer: stock
insurer
⩥ The Fair Credit and Reporting Act's main purpose is to Answer:
protect consumers with guidelines regarding credit reporting and
distribution
⩥ The Do Not Call Registry offers exemptions for calls placed from all
of the following EXCEPT Answer: Insurance sales calls
⩥ An insurer's ability to make unpredictable payouts to policyowners is
called Answer: Liquidity
⩥ A nonparticipating policy will Answer: not pay dividends
⩥ Ken is a producer who has obtained Consumer Information Reports
under false pretenses. Under the Fair Credit Reporting Act, what is the
maximum penalty that may be imposed on Ken? Answer: $5,000
⩥ A life insurance company has transferred some of its risk to another
insurer. The insurer assuming the risk is called the Answer: reinsurer
⩥ 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
,⩥ Which of these are considered to be events or conditions that increase
the chances of an insured's loss? Answer: Hazards
⩥ People with higher loss exposure have the tendency to purchase
insurance more often than those at average risk. This is called Answer:
adverse selection
⩥ An example of risk sharing would be Answer: Doctors pooling their
money to cover malpractice exposures
⩥ Which of these techniques will remove the risk of losing money in the
stock market by never purchasing stocks? Answer: Risk Avoidance
⩥ How do insurers predict the increase of individual risks? Answer: The
law of large numbers
⩥ Insurance companies determine risk exposure by which of the
following? Answer: Law of large numbers and risk pooling
⩥ Because an insurance contract has been prepared by an insurance
company with no negotiation, it is considered Answer: A contract of
adhesion
, ⩥ A producer's powers stated in the agency contract are: Answer:
Express
⩥ What makes an insurance policy a unilateral contract? Answer: Only
the insurer is legally bound
⩥ Intentional withholding of material facts that would affect an
insurance policy's validity is called a(n) Answer: Concealment
⩥ Legal purpose is a term used in contract law meaning Answer: there
must be legal reasons for entering into the contract
⩥ What are an applicant's statements concerning occupation, hobbies,
and personal health history regarded as? Answer: representation
⩥ Which type of clause describes the following statement: "We have
issued the policy in consideration of the representations in your
applications and payment of the first-term premium". Answer:
consideration clause
⩥ When the principal gives the agent authority in writing, it's referred to
as Answer: Express authority
⩥ The term which describes the fact that both parties of a contract may
NOT receive the same value is referred to as Answer: Aleatory
CERTIFICATION 2026 QUESTIONS WITH
VERIFIED SOLUTIONS GRADED A+
⩥ What is considered to be the primary reason for buying life insurance?
Answer: Provide death benefits
⩥ Which of the following is NOT considered advertising? Answer: A
rating from a rating service company, such as A.M. Best
⩥ A plan in which an employer pays insurance benefits from a fund
derived from the employer's current revenues is called Answer: A self-
funded plan
⩥ What kind of life insurance policy issued by a mutual insurer provides
a return of divisible surplus? Answer: Participating life insurance policy
⩥ Why are dividends from a mutual insurer not subject to taxation?
Answer: Because dividends are considered to be a return of premium
⩥ A type of insurer that is owned by its policyowners is called Answer:
Mutual
,⩥ A nonparticipating company is sometimes called a(n) Answer: stock
insurer
⩥ The Fair Credit and Reporting Act's main purpose is to Answer:
protect consumers with guidelines regarding credit reporting and
distribution
⩥ The Do Not Call Registry offers exemptions for calls placed from all
of the following EXCEPT Answer: Insurance sales calls
⩥ An insurer's ability to make unpredictable payouts to policyowners is
called Answer: Liquidity
⩥ A nonparticipating policy will Answer: not pay dividends
⩥ Ken is a producer who has obtained Consumer Information Reports
under false pretenses. Under the Fair Credit Reporting Act, what is the
maximum penalty that may be imposed on Ken? Answer: $5,000
⩥ A life insurance company has transferred some of its risk to another
insurer. The insurer assuming the risk is called the Answer: reinsurer
⩥ 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
,⩥ Which of these are considered to be events or conditions that increase
the chances of an insured's loss? Answer: Hazards
⩥ People with higher loss exposure have the tendency to purchase
insurance more often than those at average risk. This is called Answer:
adverse selection
⩥ An example of risk sharing would be Answer: Doctors pooling their
money to cover malpractice exposures
⩥ Which of these techniques will remove the risk of losing money in the
stock market by never purchasing stocks? Answer: Risk Avoidance
⩥ How do insurers predict the increase of individual risks? Answer: The
law of large numbers
⩥ Insurance companies determine risk exposure by which of the
following? Answer: Law of large numbers and risk pooling
⩥ Because an insurance contract has been prepared by an insurance
company with no negotiation, it is considered Answer: A contract of
adhesion
, ⩥ A producer's powers stated in the agency contract are: Answer:
Express
⩥ What makes an insurance policy a unilateral contract? Answer: Only
the insurer is legally bound
⩥ Intentional withholding of material facts that would affect an
insurance policy's validity is called a(n) Answer: Concealment
⩥ Legal purpose is a term used in contract law meaning Answer: there
must be legal reasons for entering into the contract
⩥ What are an applicant's statements concerning occupation, hobbies,
and personal health history regarded as? Answer: representation
⩥ Which type of clause describes the following statement: "We have
issued the policy in consideration of the representations in your
applications and payment of the first-term premium". Answer:
consideration clause
⩥ When the principal gives the agent authority in writing, it's referred to
as Answer: Express authority
⩥ The term which describes the fact that both parties of a contract may
NOT receive the same value is referred to as Answer: Aleatory
