LIFE AND HEALTH INSURANCE EXAM
1 2025 QUESTIONS AND ANSWERS
UNIT 1: The term used to describe the individual who is covered by the insurance is
A. insurer
B. insured
C. policyowner
D. risk - ANS B
Which of the following is a risk?
A. A car may need to have new brakes installed after several years of regular driving.
B. An individual may need medical attention after slipping on the ice and falling.
C. Both are examples of risk.
D. Neither is an example of risk. - ANS B
The estimation of future losses is more accurate when information is from
A. a small select group
B. a large group
C. a medium-sized group
D. any size group; group size does not matter - ANS A
The application of the law of large numbers enables insurers to
A. estimate the future losses of a class or group of people
1 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
, B. predict the future losses of speci c individuals
C. charge higher premiums for insurance
D. calculate mortality charges - ANS B
Which type of policy is designed to protect against the risk of living too long?
A. Casualty
B. Life
C. Annuity
D. Medical expense - ANS C
Which of the following is a type of insurance company owned by its shareholders?
A. Mutual B. Stock
C. Lloyd's D. Reinsurer - ANS B
The ZYX Insurance Company is incorporated in Alabama. While doing business in Texas, it is
A. adomesticinsurer B. a foreign insurer C. an alien insurer D. an export insurer - ANS B
The ZYX Insurance Company is incorporated in Mexico. While doing business in Texas, it is
A. adomesticinsurer B. a foreign insurer C. an alien insurer D. an export insurer - ANS C
Self-insurance is an example of which method of handling risk?
A. Acceptance B. Transference C. Avoidance D. Reduction - ANS A
Which of the following terms is used to denote insurance companies?
A. Broker
B. Exchange C. Corporation D. Insurer - ANS D
2 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
,A social device for spreading the chance of financial loss among a large number of people is the
definition of
A. hazard
B. risk
C. insurance
D. peril - ANS C
Which of the following risks is most likely to be
insurable?
A. George is concerned about the financial impact his premature death would have on his
family.
B. Talyn is concerned about the financial impact large betting losses at the horse track will have
on his retirement savings.
C. John is concerned about the financial impact on his savings when his car eventually becomes
worn enough to need to be replaced.
D. Jewel is concerned about the nancial effect losing her hat would have on her weekly
spending money. - ANS A
Roger refuses to travel by airplane. Roger is managing the risk of being in a plane crash by
A. reduction B. avoidance C. transference D. retention - ANS B
Chianna becomes injured in a car accident caused when she took her eyes off the road to
answer her cell phone. This is an example of
A. a physical hazard
B. a moral hazard
C. a morale hazard
D. a legal hazard - ANS C
3 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
, An arrangement in which an insurer transfers part of the insurance risk to another insurance
company is known as
A. avoidance
B. fraud
C. Lloyd's associations
D. reinsurance - ANS D
Which of the following is NOT an example of insurable interest?
A. Jose wishes to take out a life insurance policy on his own life to provide for his family in the
event of his death.
B. Ana wishes to take out a life insurance policy on her mother to ensure that funeral costs will
be covered when the time comes.
C. Juan wishes to take out a life insurance policy on his neighbor because his neighbor is a
careless driver and Juan thinks his neighbor is likely to die in a car accident.
D. Carla wishes to take out a life insurance policy on her best salesperson to protect the
business from lost sales in the event of the salesperson's death. - ANS C
Kim is injured in a house fire. When the bills come, the insurance company pays 80% of the
cost, and Kim pays the rest. This is an example of
A. coinsurance
B. a deductible
C. extraneous insurance D. policy limits - ANS A
Hoosier Insurance Company is owned by the policyholders. Hoosier Insurance is
A. a stock insurer
B. a mutual insurer C. a nonpro t insurer D. a fraternal insurer - ANS B
Which of the following people represents several insurance companies but owns the policy
expirations?
4 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
1 2025 QUESTIONS AND ANSWERS
UNIT 1: The term used to describe the individual who is covered by the insurance is
A. insurer
B. insured
C. policyowner
D. risk - ANS B
Which of the following is a risk?
A. A car may need to have new brakes installed after several years of regular driving.
B. An individual may need medical attention after slipping on the ice and falling.
C. Both are examples of risk.
D. Neither is an example of risk. - ANS B
The estimation of future losses is more accurate when information is from
A. a small select group
B. a large group
C. a medium-sized group
D. any size group; group size does not matter - ANS A
The application of the law of large numbers enables insurers to
A. estimate the future losses of a class or group of people
1 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
, B. predict the future losses of speci c individuals
C. charge higher premiums for insurance
D. calculate mortality charges - ANS B
Which type of policy is designed to protect against the risk of living too long?
A. Casualty
B. Life
C. Annuity
D. Medical expense - ANS C
Which of the following is a type of insurance company owned by its shareholders?
A. Mutual B. Stock
C. Lloyd's D. Reinsurer - ANS B
The ZYX Insurance Company is incorporated in Alabama. While doing business in Texas, it is
A. adomesticinsurer B. a foreign insurer C. an alien insurer D. an export insurer - ANS B
The ZYX Insurance Company is incorporated in Mexico. While doing business in Texas, it is
A. adomesticinsurer B. a foreign insurer C. an alien insurer D. an export insurer - ANS C
Self-insurance is an example of which method of handling risk?
A. Acceptance B. Transference C. Avoidance D. Reduction - ANS A
Which of the following terms is used to denote insurance companies?
A. Broker
B. Exchange C. Corporation D. Insurer - ANS D
2 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
,A social device for spreading the chance of financial loss among a large number of people is the
definition of
A. hazard
B. risk
C. insurance
D. peril - ANS C
Which of the following risks is most likely to be
insurable?
A. George is concerned about the financial impact his premature death would have on his
family.
B. Talyn is concerned about the financial impact large betting losses at the horse track will have
on his retirement savings.
C. John is concerned about the financial impact on his savings when his car eventually becomes
worn enough to need to be replaced.
D. Jewel is concerned about the nancial effect losing her hat would have on her weekly
spending money. - ANS A
Roger refuses to travel by airplane. Roger is managing the risk of being in a plane crash by
A. reduction B. avoidance C. transference D. retention - ANS B
Chianna becomes injured in a car accident caused when she took her eyes off the road to
answer her cell phone. This is an example of
A. a physical hazard
B. a moral hazard
C. a morale hazard
D. a legal hazard - ANS C
3 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
, An arrangement in which an insurer transfers part of the insurance risk to another insurance
company is known as
A. avoidance
B. fraud
C. Lloyd's associations
D. reinsurance - ANS D
Which of the following is NOT an example of insurable interest?
A. Jose wishes to take out a life insurance policy on his own life to provide for his family in the
event of his death.
B. Ana wishes to take out a life insurance policy on her mother to ensure that funeral costs will
be covered when the time comes.
C. Juan wishes to take out a life insurance policy on his neighbor because his neighbor is a
careless driver and Juan thinks his neighbor is likely to die in a car accident.
D. Carla wishes to take out a life insurance policy on her best salesperson to protect the
business from lost sales in the event of the salesperson's death. - ANS C
Kim is injured in a house fire. When the bills come, the insurance company pays 80% of the
cost, and Kim pays the rest. This is an example of
A. coinsurance
B. a deductible
C. extraneous insurance D. policy limits - ANS A
Hoosier Insurance Company is owned by the policyholders. Hoosier Insurance is
A. a stock insurer
B. a mutual insurer C. a nonpro t insurer D. a fraternal insurer - ANS B
Which of the following people represents several insurance companies but owns the policy
expirations?
4 Copyright ©BRIGHSTARS ALL RIGHTS RESERVED 2025
