PSI Life Exam | 2026/2027 Edition | 150 Questions | Original
Evaluation with Verified Correct Answers
PSI Life Insurance Certification Assessment | Expert-Verified Q&A | Certification-Ready
Format
Introduction
This 2026/2027 PSI Life Exam Evaluation focuses on life insurance policy concepts, contract provisions,
underwriting, beneficiaries, riders, annuity contracts, retirement plan fundamentals, tax implications, licensing
duties, market conduct, and state insurance regulation. The material integrates policy structure, annuity income
design, retirement distribution rules, federal tax treatment, suitability, replacement standards, advertising
controls, unfair trade prohibitions, producer authority, and ethical conduct so candidates can demonstrate
professional competency, regulatory compliance, and accurate client-centered administration in life insurance
transactions. Because no single state jurisdiction was selected, state-law items are aligned to common PSI-style life
insurance content outlines, NAIC-based regulatory standards, and widely adopted state insurance code principles
for the 2026/2027 licensing cycle.
Content Area Overview
Content Area Questions (Total 150) Key Topics Weight
Risk, insurable interest,
underwriting, term life,
whole life, universal life,
Life Insurance Concepts,
45 of 150 variable life, policy 30%
Policies, and Provisions
provisions, riders,
nonforfeiture values,
beneficiaries
Immediate and deferred
annuities, fixed and
variable annuities, equity-
Annuities, Retirement
30 of 150 indexed annuities, payout 20%
Plans, and Trusts
options, qualified plans,
IRAs, trusts, beneficiary
planning
Premium and death
benefit taxation,
dividends, loans, MECs,
Taxation and Retirement annuity taxation,
23 of 150 15%
Concepts qualified plan
contributions, rollovers,
required distributions,
estate concepts
Licensing, producer
authority, appointments,
State Insurance fiduciary duties, unfair
Regulations, Licensing, 52 of 150 trade acts, replacement, 35%
and Ethics suitability, advertising,
privacy, claims,
recordkeeping, penalties
,Examination Questions
Domain: Life Insurance Concepts, Policies, and Provisions
1. Which principle states that a person should have a lawful economic or emotional relationship
with the insured at policy inception?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Adhesion
Correct Answer: B
Rationale: Insurable interest helps prevent wagering contracts by requiring a valid relationship or financial
exposure when life insurance is purchased.
2. When must insurable interest generally exist for an individual life insurance policy?
A. Only when a death claim is submitted
B. Only after the contestable period ends
C. At the time of application or policy issue
D. Every year on the policy anniversary
Correct Answer: C
Rationale: For life insurance, insurable interest is required at application or issue, but it generally does not
need to continue until death.
3. Which party owns the rights to change beneficiaries, assign the policy, and select settlement
options unless limited by contract?
A. Insured
B. Beneficiary
C. Policyowner
D. Medical examiner
Correct Answer: C
Rationale: The policyowner controls ownership rights, even when the insured is a different person.
4. What is the consideration given by the applicant in a life insurance contract?
A. The insurer's underwriting manual
B. Statements in the application and initial premium
C. The beneficiary's signature only
D. The producer's license number
Correct Answer: B
Rationale: Consideration from the applicant consists of truthful application statements and premium payment
required to form the contract.
5. A life insurance policy is described as aleatory because:
A. Both parties exchange equal dollar amounts
B. The insurer's performance may be far greater than premiums paid
C. It can be changed only by oral agreement
D. It is issued without underwriting
Correct Answer: B
Rationale: An aleatory contract involves unequal exchange because a covered loss may trigger benefits much
larger than premiums paid.
6. Which contract characteristic means the policy is drafted by the insurer and accepted or
rejected by the applicant as written?
A. Adhesion
B. Commutation
C. Estoppel
D. Subrogation
Correct Answer: A
Rationale: A contract of adhesion is prepared by one party, so ambiguous wording is commonly interpreted in
favor of the policyowner or insured.
7. Which life policy provides coverage for a stated period and pays a death benefit only if death
occurs during that period?
A. Term life
B. Whole life
, C. Deferred annuity
D. Endowment settlement
Correct Answer: A
Rationale: Term life provides temporary protection for a defined term and normally has no cash value.
8. Which term life feature allows the insured to obtain a permanent policy without proving
insurability during a specified time?
A. Conversion privilege
B. Spendthrift clause
C. Collateral assignment
D. Dividend accumulation
Correct Answer: A
Rationale: A conversion privilege lets the policyowner convert term coverage to permanent coverage without
new evidence of insurability.
9. Which type of term insurance has a death benefit that declines over time while premiums
usually remain level?
A. Decreasing term
B. Increasing whole life
C. Variable universal life
D. Single premium whole life
Correct Answer: A
Rationale: Decreasing term is commonly used for needs that reduce over time, such as a mortgage balance.
10. Which life policy is designed to remain in force for the insured's entire lifetime and build cash
value?
A. Whole life
B. Annual renewable term
C. Credit disability
D. Immediate annuity
Correct Answer: A
Rationale: Whole life combines lifetime protection with cash value accumulation if required premiums are
paid.
11. Which premium pattern is typical of ordinary whole life insurance?
A. Premiums rise every month
B. Level premiums over the premium-paying period
C. Premiums are due only after death
D. Premiums are paid only by the beneficiary
Correct Answer: B
Rationale: Ordinary whole life uses level premiums that are higher than early mortality cost and help fund
later-year protection and cash value.
12. Which policy allows flexible premiums and an adjustable death benefit while crediting interest
to a cash value account?
A. Universal life
B. Decreasing term
C. Fixed immediate annuity
D. Industrial life
Correct Answer: A
Rationale: Universal life provides flexible premium timing and adjustable death benefit options subject to
policy requirements and cost deductions.
13. In a universal life policy, which death benefit option generally pays a level specified amount?
A. Option A
B. Option B
C. Life income option
D. Period certain option
Correct Answer: A
Rationale: Option A generally provides a level death benefit, with cash value forming part of the total benefit
structure.
14. Which life policy places cash value in separate accounts and shifts investment risk to the
policyowner?
Evaluation with Verified Correct Answers
PSI Life Insurance Certification Assessment | Expert-Verified Q&A | Certification-Ready
Format
Introduction
This 2026/2027 PSI Life Exam Evaluation focuses on life insurance policy concepts, contract provisions,
underwriting, beneficiaries, riders, annuity contracts, retirement plan fundamentals, tax implications, licensing
duties, market conduct, and state insurance regulation. The material integrates policy structure, annuity income
design, retirement distribution rules, federal tax treatment, suitability, replacement standards, advertising
controls, unfair trade prohibitions, producer authority, and ethical conduct so candidates can demonstrate
professional competency, regulatory compliance, and accurate client-centered administration in life insurance
transactions. Because no single state jurisdiction was selected, state-law items are aligned to common PSI-style life
insurance content outlines, NAIC-based regulatory standards, and widely adopted state insurance code principles
for the 2026/2027 licensing cycle.
Content Area Overview
Content Area Questions (Total 150) Key Topics Weight
Risk, insurable interest,
underwriting, term life,
whole life, universal life,
Life Insurance Concepts,
45 of 150 variable life, policy 30%
Policies, and Provisions
provisions, riders,
nonforfeiture values,
beneficiaries
Immediate and deferred
annuities, fixed and
variable annuities, equity-
Annuities, Retirement
30 of 150 indexed annuities, payout 20%
Plans, and Trusts
options, qualified plans,
IRAs, trusts, beneficiary
planning
Premium and death
benefit taxation,
dividends, loans, MECs,
Taxation and Retirement annuity taxation,
23 of 150 15%
Concepts qualified plan
contributions, rollovers,
required distributions,
estate concepts
Licensing, producer
authority, appointments,
State Insurance fiduciary duties, unfair
Regulations, Licensing, 52 of 150 trade acts, replacement, 35%
and Ethics suitability, advertising,
privacy, claims,
recordkeeping, penalties
,Examination Questions
Domain: Life Insurance Concepts, Policies, and Provisions
1. Which principle states that a person should have a lawful economic or emotional relationship
with the insured at policy inception?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Adhesion
Correct Answer: B
Rationale: Insurable interest helps prevent wagering contracts by requiring a valid relationship or financial
exposure when life insurance is purchased.
2. When must insurable interest generally exist for an individual life insurance policy?
A. Only when a death claim is submitted
B. Only after the contestable period ends
C. At the time of application or policy issue
D. Every year on the policy anniversary
Correct Answer: C
Rationale: For life insurance, insurable interest is required at application or issue, but it generally does not
need to continue until death.
3. Which party owns the rights to change beneficiaries, assign the policy, and select settlement
options unless limited by contract?
A. Insured
B. Beneficiary
C. Policyowner
D. Medical examiner
Correct Answer: C
Rationale: The policyowner controls ownership rights, even when the insured is a different person.
4. What is the consideration given by the applicant in a life insurance contract?
A. The insurer's underwriting manual
B. Statements in the application and initial premium
C. The beneficiary's signature only
D. The producer's license number
Correct Answer: B
Rationale: Consideration from the applicant consists of truthful application statements and premium payment
required to form the contract.
5. A life insurance policy is described as aleatory because:
A. Both parties exchange equal dollar amounts
B. The insurer's performance may be far greater than premiums paid
C. It can be changed only by oral agreement
D. It is issued without underwriting
Correct Answer: B
Rationale: An aleatory contract involves unequal exchange because a covered loss may trigger benefits much
larger than premiums paid.
6. Which contract characteristic means the policy is drafted by the insurer and accepted or
rejected by the applicant as written?
A. Adhesion
B. Commutation
C. Estoppel
D. Subrogation
Correct Answer: A
Rationale: A contract of adhesion is prepared by one party, so ambiguous wording is commonly interpreted in
favor of the policyowner or insured.
7. Which life policy provides coverage for a stated period and pays a death benefit only if death
occurs during that period?
A. Term life
B. Whole life
, C. Deferred annuity
D. Endowment settlement
Correct Answer: A
Rationale: Term life provides temporary protection for a defined term and normally has no cash value.
8. Which term life feature allows the insured to obtain a permanent policy without proving
insurability during a specified time?
A. Conversion privilege
B. Spendthrift clause
C. Collateral assignment
D. Dividend accumulation
Correct Answer: A
Rationale: A conversion privilege lets the policyowner convert term coverage to permanent coverage without
new evidence of insurability.
9. Which type of term insurance has a death benefit that declines over time while premiums
usually remain level?
A. Decreasing term
B. Increasing whole life
C. Variable universal life
D. Single premium whole life
Correct Answer: A
Rationale: Decreasing term is commonly used for needs that reduce over time, such as a mortgage balance.
10. Which life policy is designed to remain in force for the insured's entire lifetime and build cash
value?
A. Whole life
B. Annual renewable term
C. Credit disability
D. Immediate annuity
Correct Answer: A
Rationale: Whole life combines lifetime protection with cash value accumulation if required premiums are
paid.
11. Which premium pattern is typical of ordinary whole life insurance?
A. Premiums rise every month
B. Level premiums over the premium-paying period
C. Premiums are due only after death
D. Premiums are paid only by the beneficiary
Correct Answer: B
Rationale: Ordinary whole life uses level premiums that are higher than early mortality cost and help fund
later-year protection and cash value.
12. Which policy allows flexible premiums and an adjustable death benefit while crediting interest
to a cash value account?
A. Universal life
B. Decreasing term
C. Fixed immediate annuity
D. Industrial life
Correct Answer: A
Rationale: Universal life provides flexible premium timing and adjustable death benefit options subject to
policy requirements and cost deductions.
13. In a universal life policy, which death benefit option generally pays a level specified amount?
A. Option A
B. Option B
C. Life income option
D. Period certain option
Correct Answer: A
Rationale: Option A generally provides a level death benefit, with cash value forming part of the total benefit
structure.
14. Which life policy places cash value in separate accounts and shifts investment risk to the
policyowner?
