PSI - NY LIFE, ACCIDENT AND HEALTH
PRACTICE EXAM 17-55 Questions And Correct
Answers (Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf.
SECTION 1: INSURANCE BASICS AND RISK MANAGEMENT
1. Which of the following types of risk can be insured?
A. Speculative risk
B. Pure risk
C. Investment risk
D. Market risk
Correct Answer: B
Rationale: Only pure risks, those involving the potential for loss or no loss, are insurable.
Speculative risks involve the potential for gain and are not insurable .
2. Which of the following is considered a characteristic of insurance?
A. Risk retention
B. Risk transfer
C. Risk avoidance
D. Risk creation
Correct Answer: B
Rationale: Insurance involves transferring risk from an individual to an insurance
company .
,3. Which of the following best defines insurable interest?
A. The ability to make premium payments
B. A legitimate interest in the continued life or health of the insured
C. The right to sell a policy for profit
D. Contractual ownership of the policy
Correct Answer: B
Rationale: Insurable interest means the policyowner must stand to suffer a financial or
emotional loss from the insured's death or disability .
4. The principle of indemnity in insurance means:
A. Insurance pays more than the loss
B. The insurer guarantees a profit to the insured
C. Insurance restores the insured to their original financial position
D. The insured can collect multiple times for the same loss
Correct Answer: C
Rationale: Indemnity ensures the insured does not profit from a loss, only restores to pre-
loss condition .
5. Which is a method used to control risk in insurance?
A. Risk assumption
B. Risk reduction
C. Risk avoidance
D. All of the above
Correct Answer: D
Rationale: All listed methods (assumption, reduction, avoidance) are strategies for
controlling risk .
6. Why are insurance policies considered conditional contracts?
A. They require signatures from both parties
,B. Certain conditions need to be met to make the contract legally enforceable
C. They can be canceled at any time
D. They require monthly payments
Correct Answer: B
Rationale: Certain conditions need to be met to make the contract legally enforceable .
7. Which is NOT an element of a legal insurance contract?
A. Consideration
B. Counteroffer
C. Legal purpose
D. Competent parties
Correct Answer: B
Rationale: A valid contract requires offer and acceptance, consideration, legal purpose, and
competent parties. Counteroffer is a negotiation step, not a contract element .
SECTION 2: REGULATION AND LICENSING
8. In New York, an insurance agent primarily represents:
A. The insured
B. The insurer
C. The Department of Financial Services
D. The underwriter
Correct Answer: B
Rationale: An insurance agent acts on behalf of the insurance company, not the
policyholder .
9. A producer acting as a broker in New York primarily represents:
A. The insurer
B. The insured
, C. The Department of Financial Services
D. The reinsurer
Correct Answer: B
Rationale: In New York, a broker represents the insured in securing policies from insurers,
unlike an agent who represents the insurer .
10. The primary purpose of underwriting is to:
A. Settle claims
B. Determine the applicant's eligibility for insurance
C. Invest insurer profits
D. Develop marketing campaigns
Correct Answer: B
Rationale: Underwriters assess the risk associated with applicants and determine whether
and under what terms to issue coverage .
11. Obtaining consumer information reports under false pretenses is prosecutable
by which law?
A. USA PATRIOT Act
B. Fair Credit Reporting Act
C. HIPAA
D. NCOIL Act
Correct Answer: B
Rationale: Obtaining consumer information reports under false pretenses is prosecutable
under the Fair Credit Reporting Act .
12. What specific procedures does the USA PATRIOT Act require of insurance
companies?
A. Establish an anti-money laundering program
B. Report all claims
PRACTICE EXAM 17-55 Questions And Correct
Answers (Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf.
SECTION 1: INSURANCE BASICS AND RISK MANAGEMENT
1. Which of the following types of risk can be insured?
A. Speculative risk
B. Pure risk
C. Investment risk
D. Market risk
Correct Answer: B
Rationale: Only pure risks, those involving the potential for loss or no loss, are insurable.
Speculative risks involve the potential for gain and are not insurable .
2. Which of the following is considered a characteristic of insurance?
A. Risk retention
B. Risk transfer
C. Risk avoidance
D. Risk creation
Correct Answer: B
Rationale: Insurance involves transferring risk from an individual to an insurance
company .
,3. Which of the following best defines insurable interest?
A. The ability to make premium payments
B. A legitimate interest in the continued life or health of the insured
C. The right to sell a policy for profit
D. Contractual ownership of the policy
Correct Answer: B
Rationale: Insurable interest means the policyowner must stand to suffer a financial or
emotional loss from the insured's death or disability .
4. The principle of indemnity in insurance means:
A. Insurance pays more than the loss
B. The insurer guarantees a profit to the insured
C. Insurance restores the insured to their original financial position
D. The insured can collect multiple times for the same loss
Correct Answer: C
Rationale: Indemnity ensures the insured does not profit from a loss, only restores to pre-
loss condition .
5. Which is a method used to control risk in insurance?
A. Risk assumption
B. Risk reduction
C. Risk avoidance
D. All of the above
Correct Answer: D
Rationale: All listed methods (assumption, reduction, avoidance) are strategies for
controlling risk .
6. Why are insurance policies considered conditional contracts?
A. They require signatures from both parties
,B. Certain conditions need to be met to make the contract legally enforceable
C. They can be canceled at any time
D. They require monthly payments
Correct Answer: B
Rationale: Certain conditions need to be met to make the contract legally enforceable .
7. Which is NOT an element of a legal insurance contract?
A. Consideration
B. Counteroffer
C. Legal purpose
D. Competent parties
Correct Answer: B
Rationale: A valid contract requires offer and acceptance, consideration, legal purpose, and
competent parties. Counteroffer is a negotiation step, not a contract element .
SECTION 2: REGULATION AND LICENSING
8. In New York, an insurance agent primarily represents:
A. The insured
B. The insurer
C. The Department of Financial Services
D. The underwriter
Correct Answer: B
Rationale: An insurance agent acts on behalf of the insurance company, not the
policyholder .
9. A producer acting as a broker in New York primarily represents:
A. The insurer
B. The insured
, C. The Department of Financial Services
D. The reinsurer
Correct Answer: B
Rationale: In New York, a broker represents the insured in securing policies from insurers,
unlike an agent who represents the insurer .
10. The primary purpose of underwriting is to:
A. Settle claims
B. Determine the applicant's eligibility for insurance
C. Invest insurer profits
D. Develop marketing campaigns
Correct Answer: B
Rationale: Underwriters assess the risk associated with applicants and determine whether
and under what terms to issue coverage .
11. Obtaining consumer information reports under false pretenses is prosecutable
by which law?
A. USA PATRIOT Act
B. Fair Credit Reporting Act
C. HIPAA
D. NCOIL Act
Correct Answer: B
Rationale: Obtaining consumer information reports under false pretenses is prosecutable
under the Fair Credit Reporting Act .
12. What specific procedures does the USA PATRIOT Act require of insurance
companies?
A. Establish an anti-money laundering program
B. Report all claims
