Primerica Exam Review Questions and
Answers
If an insurer meets the state's financial requirements and is approved to transact
business in the state, it is considered to be - correct answer-Authorized
A participating insurance policy may do which of the following? - correct answer-Pay
dividends to the policy owner
An insured owns a life insurance policy. To be able to pay some of her medical bills, she
withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the
insurer charges a fee. What type of policy does the insured most likely have? - correct
answer-Universal life
All of the following are examples of third-party ownership of a life insurance policy
EXCEPT - correct answer-An insured borrows money from the back and makes a
collateral assignment of a part of the death benefit to secure the loan.
Which statement is NOT true regarding a Straight Life policy? - correct answer-Its
premium steadily decreases over time, in response to its growing cash value.
An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years
later, he died in an automobile accident. How much will his wife receive from the policy?
- correct answer-$100,000
A person takes out a loan in order to pay off his house. He dies several years later,
having paid off only a small portion of the debt. Which of the following is true? - correct
answer-If the lender has credit insurance, this amount will be paid to the lender.
Two individuals are in the same risk and age class; yet, they are charged different rates
of their insurance policies die to an insignificant factor. What is this called? - correct
answer-Discrimination
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide
additional protection until his children finished college. He discovered that his policy -
correct answer-Required a premium increase each renewal.
If a consumer requests additional information concerning an investigation consumer
report, how long does the insurer or reporting agency have to comply? - correct answer-
5 days
How is the Insurance Guaranty Association funded? - correct answer-By its members-
authorized insurers
,An individual has just borrowed $10,000 from his bank on a 5-year installment loan
requiring monthly payments. What type of life insurance policy would be best suited to
this situation? - correct answer-Decreasing term
After a back injury, an insured is disabled for a year. His insurance policy carries a
Disability Income Benefit rider. Which of the following benefits will he receive? - correct
answer-Monthly premium waiver and monthly income
All of the following could be considered rebates if offered to an insured in the sale of
insurance EXCEPT - correct answer-Dividends from a mutual insurer.
The type of policy that can be changed from one that does not accumulate cash value
to the one that does is a - correct answer-Convertible Term Policy.
After its issuance, the temporary work authority expires after how many days - correct
answer-180 days not 60
All of the following would be considered an insurance transaction EXCEPT - correct
answer-Obtaining an insurance license.
The requirement that agents must account for all insurance funds collected, and are not
permitted to comingle those funds with their own is known as - correct answer-Fiduciary
responsibility.
What is the purpose of a fixed-period settlement option? - correct answer-To provide a
guaranteed income for a certain amount of time
During policy replacement, the replacing insurer must notify existing insurers within
what time period? - correct answer-5 business days
What significance did U.S. vs. South-Eastern Underwriters have on the insurance
industry? - correct answer-It reversed the decision of Paul vs. Virginia, determining that
insurance is interstate commerce and should be regulated federally.
Items stipulated in the contract that the insurer will not provide coverage for are found in
the - correct answer-Exclusions clause.
When a life insurance policy is cancelled and the insured has selected the extended
term nonforfeiture option, the cash value will be used to purchase term insurance that
has a face amount - correct answer-Equal to the original policy for as long a period of
time that the cash values will purchase.
All of the following are characteristics of group life insurance EXCEPT - correct answer-
Premiums are determined by the age, sex and occupation of each individual certificate
holder.
, An individual applied for an insurance policy and paid the initial premium. The insurer
issued a conditional receipt. Five days later the applicant had to submit to a medical
exam. If the policy is issued, what would be the policy's effective date? - correct answer-
The date of medical exam
For a retirement plan to be qualified, it must be designed for the benefit of - correct
answer-Employees.
Which of the following statements about a life insurance policy would be allowed in an
insurance advertisement? - correct answer-This is a term life insurance policy.
Which of the following is a generic consumer publication that explains life insurance in
general terms in order to assist the applicant in the decision-making process? - correct
answer-Buyer's Guide
Which of the following employees insured under a group life plan would be allowed to
convert to individual insurance of the same coverage once the plan is terminated? -
correct answer-Those who have been insured under the plan for at least 5 years
The interest earned on policy dividends is - correct answer-taxable
A rider that may be attached to a life insurance policy that will adjust the face amount
based upon a specific index, such as the Consumer Price Index, is called - correct
answer-Cost of living rider.
According to the Entire Contract provision, a policy must contain - correct answer-A
copy of the original application for insurance.
Which is NOT true about beneficiary designations? - correct answer-The beneficiary
must have insurable interest in the insured.
Which of the following factors determines the amount of each installment paid in a Life
Income Option arrangement? - correct answer-Recipient's life expectancy and amount
of principal
An insured pays $1,200 annually for her life insurance premium. The insured applies
this year's $300 worth of accumulated dividends to the next year's premium, thus
reducing it to $900. What option does this describe? - correct answer-Reduction of
Premium
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? -
correct answer-The employer is the owner and beneficiary.
What is reinsurance? - correct answer-An agreement between a ceding insurer an
assuming insurer
Answers
If an insurer meets the state's financial requirements and is approved to transact
business in the state, it is considered to be - correct answer-Authorized
A participating insurance policy may do which of the following? - correct answer-Pay
dividends to the policy owner
An insured owns a life insurance policy. To be able to pay some of her medical bills, she
withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the
insurer charges a fee. What type of policy does the insured most likely have? - correct
answer-Universal life
All of the following are examples of third-party ownership of a life insurance policy
EXCEPT - correct answer-An insured borrows money from the back and makes a
collateral assignment of a part of the death benefit to secure the loan.
Which statement is NOT true regarding a Straight Life policy? - correct answer-Its
premium steadily decreases over time, in response to its growing cash value.
An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years
later, he died in an automobile accident. How much will his wife receive from the policy?
- correct answer-$100,000
A person takes out a loan in order to pay off his house. He dies several years later,
having paid off only a small portion of the debt. Which of the following is true? - correct
answer-If the lender has credit insurance, this amount will be paid to the lender.
Two individuals are in the same risk and age class; yet, they are charged different rates
of their insurance policies die to an insignificant factor. What is this called? - correct
answer-Discrimination
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide
additional protection until his children finished college. He discovered that his policy -
correct answer-Required a premium increase each renewal.
If a consumer requests additional information concerning an investigation consumer
report, how long does the insurer or reporting agency have to comply? - correct answer-
5 days
How is the Insurance Guaranty Association funded? - correct answer-By its members-
authorized insurers
,An individual has just borrowed $10,000 from his bank on a 5-year installment loan
requiring monthly payments. What type of life insurance policy would be best suited to
this situation? - correct answer-Decreasing term
After a back injury, an insured is disabled for a year. His insurance policy carries a
Disability Income Benefit rider. Which of the following benefits will he receive? - correct
answer-Monthly premium waiver and monthly income
All of the following could be considered rebates if offered to an insured in the sale of
insurance EXCEPT - correct answer-Dividends from a mutual insurer.
The type of policy that can be changed from one that does not accumulate cash value
to the one that does is a - correct answer-Convertible Term Policy.
After its issuance, the temporary work authority expires after how many days - correct
answer-180 days not 60
All of the following would be considered an insurance transaction EXCEPT - correct
answer-Obtaining an insurance license.
The requirement that agents must account for all insurance funds collected, and are not
permitted to comingle those funds with their own is known as - correct answer-Fiduciary
responsibility.
What is the purpose of a fixed-period settlement option? - correct answer-To provide a
guaranteed income for a certain amount of time
During policy replacement, the replacing insurer must notify existing insurers within
what time period? - correct answer-5 business days
What significance did U.S. vs. South-Eastern Underwriters have on the insurance
industry? - correct answer-It reversed the decision of Paul vs. Virginia, determining that
insurance is interstate commerce and should be regulated federally.
Items stipulated in the contract that the insurer will not provide coverage for are found in
the - correct answer-Exclusions clause.
When a life insurance policy is cancelled and the insured has selected the extended
term nonforfeiture option, the cash value will be used to purchase term insurance that
has a face amount - correct answer-Equal to the original policy for as long a period of
time that the cash values will purchase.
All of the following are characteristics of group life insurance EXCEPT - correct answer-
Premiums are determined by the age, sex and occupation of each individual certificate
holder.
, An individual applied for an insurance policy and paid the initial premium. The insurer
issued a conditional receipt. Five days later the applicant had to submit to a medical
exam. If the policy is issued, what would be the policy's effective date? - correct answer-
The date of medical exam
For a retirement plan to be qualified, it must be designed for the benefit of - correct
answer-Employees.
Which of the following statements about a life insurance policy would be allowed in an
insurance advertisement? - correct answer-This is a term life insurance policy.
Which of the following is a generic consumer publication that explains life insurance in
general terms in order to assist the applicant in the decision-making process? - correct
answer-Buyer's Guide
Which of the following employees insured under a group life plan would be allowed to
convert to individual insurance of the same coverage once the plan is terminated? -
correct answer-Those who have been insured under the plan for at least 5 years
The interest earned on policy dividends is - correct answer-taxable
A rider that may be attached to a life insurance policy that will adjust the face amount
based upon a specific index, such as the Consumer Price Index, is called - correct
answer-Cost of living rider.
According to the Entire Contract provision, a policy must contain - correct answer-A
copy of the original application for insurance.
Which is NOT true about beneficiary designations? - correct answer-The beneficiary
must have insurable interest in the insured.
Which of the following factors determines the amount of each installment paid in a Life
Income Option arrangement? - correct answer-Recipient's life expectancy and amount
of principal
An insured pays $1,200 annually for her life insurance premium. The insured applies
this year's $300 worth of accumulated dividends to the next year's premium, thus
reducing it to $900. What option does this describe? - correct answer-Reduction of
Premium
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? -
correct answer-The employer is the owner and beneficiary.
What is reinsurance? - correct answer-An agreement between a ceding insurer an
assuming insurer
