PRIMERICA LIFE INSURANCE EXAM WITH
100% CORRECT ANSWERS 2026
1. An insured purchased an insurance policy 5 years ago. Last year, she received a
dividend check from the insurance company that was not taxable. This year, she did
not receive a check from the insurer. From what type of insurer did the insured
purchase the policy?
a. reciprocal
b. nonprofit service organization
c. stock
d. mutual
Rationale: Mutual insurance companies are owned by the policyholders. Profits not
needed to pay claims or operating costs are returned to policyholders as dividends. If
all funds are used for claims and expenses, no dividends are paid. Dividends from
mutual insurers are generally not taxable as income.
2. Following a career change, an insured is no longer required to perform many
physical activities, so he has implemented a program where he walks and jogs for 45
minutes each morning. The insured has also eliminated most fatty foods from his diet.
Which method of dealing with risk does this scenario describe?
a. retention
b. reduction
c. transfer
d. avoidance
Rationale: Risk reduction involves taking actions to decrease the likelihood or
severity of loss. By exercising and improving diet, the insured reduces potential health
risks. Retention, transfer, and avoidance are other risk management strategies, but
lifestyle changes to lower risk are specifically considered reduction.
,3. In insurance, an offer is usually made when:
a. an applicant submits an application to the insurer
b. the insurer approves the application and receives the initial premium
c. the agent hands the policy to the policyholder
d. an agent explains a policy to a potential applicant
Rationale: In insurance, the applicant makes the offer through the submission of an
application. The insurer can then accept or reject the offer. Acceptance occurs when
the underwriter approves the application and issues the policy.
4. The causes of loss insured against in an insurance policy are known as:
a. perils
b. losses
c. risks
d. hazards
Rationale: A peril is the actual cause of a loss, such as fire, theft, or illness. Loss
refers to the financial consequence of a peril. Risk is the uncertainty of loss, while
hazards are conditions that increase the chance of a loss.
5. What documentation grants express authority to an agent?
a. agent’s contract with the principal
b. agent’s insurance license
c. fiduciary contract
d. state provisions
Rationale: Express authority is written into the agent’s contract with the insurer. This
allows the agent to perform specific actions on behalf of the insurance company.
Licensing authorizes an agent to sell insurance but does not define express powers.
,6. Which of the following best describes an insurance company that has been formed
under the laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign
Rationale: A domestic company is one incorporated in the state where it conducts
business. Foreign companies are incorporated in another state, and alien companies
are incorporated outside the country. Sovereign is not a legal term for insurance
incorporation.
7. Which of the following factors is NOT considered by an underwriter when
determining the premium rates for an individual seeking insurance?
a. medical history
b. sex
c. age
d. race
Rationale: Premium rates are based on factors that statistically predict risk, such as
age, sex, and medical history. Race, religion, sexual orientation, or similar factors are
considered discriminatory and cannot legally influence rates.
8. Fiduciary responsibility means:
a. handling insurer funds in a trust capacity
b. maintaining a good credit record
c. being liable with respect to payment of claims
d. commingling premiums with agent’s personal funds
Rationale: Agents have fiduciary responsibility to act in the best interest of the
insurer and policyholders. This includes keeping premiums in trust and not using them
for personal purposes. Commingling or mishandling funds violates this duty.
, 9. The authority granted to an agent through the agent’s contract is referred to as:
a. absolute authority
b. express authority
c. apparent authority
d. implied authority
Rationale: Express authority is explicitly written in the contract and defines the
agent’s powers. Implied authority includes actions assumed to be necessary to carry
out express powers. Apparent authority is how the public perceives an agent’s power.
10. Insurance policies are not drawn up through negotiations, and an insured has little
say about its provisions. What contract characteristic does this describe?
a. unilateral
b. conditional
c. personal
d. adhesion
Rationale: A contract of adhesion is prepared by one party (the insurer) and accepted
or rejected by the other (insured). The insured cannot negotiate the policy’s terms.
Unilateral and conditional are other contractual characteristics but do not describe
adhesion.
11. Which of the following insurers are owned by stockholders who have the usual
rights of ownership, including the right of voting?
a. reciprocal
b. fraternal
c. stock
d. mutual
100% CORRECT ANSWERS 2026
1. An insured purchased an insurance policy 5 years ago. Last year, she received a
dividend check from the insurance company that was not taxable. This year, she did
not receive a check from the insurer. From what type of insurer did the insured
purchase the policy?
a. reciprocal
b. nonprofit service organization
c. stock
d. mutual
Rationale: Mutual insurance companies are owned by the policyholders. Profits not
needed to pay claims or operating costs are returned to policyholders as dividends. If
all funds are used for claims and expenses, no dividends are paid. Dividends from
mutual insurers are generally not taxable as income.
2. Following a career change, an insured is no longer required to perform many
physical activities, so he has implemented a program where he walks and jogs for 45
minutes each morning. The insured has also eliminated most fatty foods from his diet.
Which method of dealing with risk does this scenario describe?
a. retention
b. reduction
c. transfer
d. avoidance
Rationale: Risk reduction involves taking actions to decrease the likelihood or
severity of loss. By exercising and improving diet, the insured reduces potential health
risks. Retention, transfer, and avoidance are other risk management strategies, but
lifestyle changes to lower risk are specifically considered reduction.
,3. In insurance, an offer is usually made when:
a. an applicant submits an application to the insurer
b. the insurer approves the application and receives the initial premium
c. the agent hands the policy to the policyholder
d. an agent explains a policy to a potential applicant
Rationale: In insurance, the applicant makes the offer through the submission of an
application. The insurer can then accept or reject the offer. Acceptance occurs when
the underwriter approves the application and issues the policy.
4. The causes of loss insured against in an insurance policy are known as:
a. perils
b. losses
c. risks
d. hazards
Rationale: A peril is the actual cause of a loss, such as fire, theft, or illness. Loss
refers to the financial consequence of a peril. Risk is the uncertainty of loss, while
hazards are conditions that increase the chance of a loss.
5. What documentation grants express authority to an agent?
a. agent’s contract with the principal
b. agent’s insurance license
c. fiduciary contract
d. state provisions
Rationale: Express authority is written into the agent’s contract with the insurer. This
allows the agent to perform specific actions on behalf of the insurance company.
Licensing authorizes an agent to sell insurance but does not define express powers.
,6. Which of the following best describes an insurance company that has been formed
under the laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign
Rationale: A domestic company is one incorporated in the state where it conducts
business. Foreign companies are incorporated in another state, and alien companies
are incorporated outside the country. Sovereign is not a legal term for insurance
incorporation.
7. Which of the following factors is NOT considered by an underwriter when
determining the premium rates for an individual seeking insurance?
a. medical history
b. sex
c. age
d. race
Rationale: Premium rates are based on factors that statistically predict risk, such as
age, sex, and medical history. Race, religion, sexual orientation, or similar factors are
considered discriminatory and cannot legally influence rates.
8. Fiduciary responsibility means:
a. handling insurer funds in a trust capacity
b. maintaining a good credit record
c. being liable with respect to payment of claims
d. commingling premiums with agent’s personal funds
Rationale: Agents have fiduciary responsibility to act in the best interest of the
insurer and policyholders. This includes keeping premiums in trust and not using them
for personal purposes. Commingling or mishandling funds violates this duty.
, 9. The authority granted to an agent through the agent’s contract is referred to as:
a. absolute authority
b. express authority
c. apparent authority
d. implied authority
Rationale: Express authority is explicitly written in the contract and defines the
agent’s powers. Implied authority includes actions assumed to be necessary to carry
out express powers. Apparent authority is how the public perceives an agent’s power.
10. Insurance policies are not drawn up through negotiations, and an insured has little
say about its provisions. What contract characteristic does this describe?
a. unilateral
b. conditional
c. personal
d. adhesion
Rationale: A contract of adhesion is prepared by one party (the insurer) and accepted
or rejected by the other (insured). The insured cannot negotiate the policy’s terms.
Unilateral and conditional are other contractual characteristics but do not describe
adhesion.
11. Which of the following insurers are owned by stockholders who have the usual
rights of ownership, including the right of voting?
a. reciprocal
b. fraternal
c. stock
d. mutual
