PSI LIFE, ACCIDENT & HEALTH ULTIMATE EXAM
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EXAM INFORMATION
- Exam Type: Life, Accident & Health Insurance Licensing
- Format: Computer-adaptive testing (CAT), multiple-choice
- Total Questions on Actual Exam: Varies by state (typically 100-160)
- Passing Score: Typically 70% (varies by state, usually 60-76%)
- Time Limit: Varies by state (typically 2-2.5 hours)
- Content Domains:
* General Insurance Concepts & Principles
* Life Insurance Basics & Policy Types
* Life Insurance Policy Provisions & Options
* Accident & Health Insurance Basics
* Health Insurance Policy Types & Provisions
* Disability Income Insurance
* Annuities
* Social Insurance (Medicare, Medicaid, Social Security)
* Insurance Regulation & Ethics
* State-Specific Regulations
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SECTION 1: GENERAL INSURANCE CONCEPTS & PRINCIPLES (Questions 1-50)
1. Which of the following best describes the function of "consideration" in an
, insurance contract?
A) The insured's premium payment and the insurer's promise to pay
B) The insurer's right to contest the policy for fraud
C) The agent's commission disclosure
D) The policy's grace period
Answer: A) The insured's premium payment and the insurer's promise to pay
Explanation: Consideration is something of value exchanged between parties. In
insurance, it is the premium paid by the insured and the insurer's promise to
pay a covered loss.[reference:0]
2. "Utmost good faith" (uberrimae fidei) requires the applicant to:
A) Pay premiums on time
B) Disclose all material facts even if not asked
C) Name a beneficiary
D) Accept policy dividends
Answer: B) Disclose all material facts even if not asked
Explanation: Utmost good faith means both parties act honestly. The applicant
must disclose all material facts that could affect the insurer's decision.[reference:1]
3. What distinguishes a conditional contract from other contracts?
A) Only the insured can cancel
B) Performance depends on certain conditions (e.g., proof of loss)
C) Premiums are adjustable
D) It requires a witness
Answer: B) Performance depends on certain conditions (e.g., proof of loss)
,Explanation: An insurance contract is conditional because the insurer's promise
to pay is contingent on the insured fulfilling conditions (e.g., notice of
claim, proof of loss).[reference:2]
4. In insurance, "indemnity" means:
A) The insured must have an insurable interest
B) The insured is restored to the same financial position before the loss
C) The insurer can cancel the policy
D) The agent receives a commission
Answer: B) The insured is restored to the same financial position before the
loss
Explanation: Indemnity means the insured is restored to the same financial
position they were in before the loss occurred, no better and no worse.[reference:3]
5. What is "insurable interest" in insurance?
A) The interest the insurer has in collecting premiums
B) A financial or emotional interest in the continued life or well-being of
the insured
C) The interest the agent has in selling the policy
D) The interest the beneficiary has in receiving the death benefit
Answer: B) A financial or emotional interest in the continued life or
well-being of the insured
Explanation: Insurable interest exists when the policyholder would suffer a
financial or emotional loss from the death or injury of the insured. It is
required at the time of policy application and ensures the policy is not a
gambling contract.[reference:4]
, 6. A "aleatory contract" is one in which:
A) The values exchanged are unequal
B) Both parties exchange equal values
C) Only the insured can cancel
D) The contract is guaranteed
Answer: A) The values exchanged are unequal
Explanation: An aleatory contract is one where the values exchanged by the
parties are unequal. In insurance, the insured pays a small premium while the
insurer may pay a large benefit if a loss occurs.
7. The principle of "subrogation" allows the insurer to:
A) Deny all claims
B) Pursue recovery from a third party that caused the loss
C) Cancel the policy at any time
D) Increase premiums without notice
Answer: B) Pursue recovery from a third party that caused the loss
Explanation: Subrogation gives the insurer the right to pursue recovery from
a third party responsible for the loss, after paying the insured's claim. This
prevents the insured from collecting twice.
8. A "representation" in insurance is:
A) A statement made by the insurer
B) A statement made by the applicant that is believed to be true
C) A guarantee by the applicant
D) A policy provision
==========================================================
======================
EXAM INFORMATION
- Exam Type: Life, Accident & Health Insurance Licensing
- Format: Computer-adaptive testing (CAT), multiple-choice
- Total Questions on Actual Exam: Varies by state (typically 100-160)
- Passing Score: Typically 70% (varies by state, usually 60-76%)
- Time Limit: Varies by state (typically 2-2.5 hours)
- Content Domains:
* General Insurance Concepts & Principles
* Life Insurance Basics & Policy Types
* Life Insurance Policy Provisions & Options
* Accident & Health Insurance Basics
* Health Insurance Policy Types & Provisions
* Disability Income Insurance
* Annuities
* Social Insurance (Medicare, Medicaid, Social Security)
* Insurance Regulation & Ethics
* State-Specific Regulations
==========================================================
======================
SECTION 1: GENERAL INSURANCE CONCEPTS & PRINCIPLES (Questions 1-50)
1. Which of the following best describes the function of "consideration" in an
, insurance contract?
A) The insured's premium payment and the insurer's promise to pay
B) The insurer's right to contest the policy for fraud
C) The agent's commission disclosure
D) The policy's grace period
Answer: A) The insured's premium payment and the insurer's promise to pay
Explanation: Consideration is something of value exchanged between parties. In
insurance, it is the premium paid by the insured and the insurer's promise to
pay a covered loss.[reference:0]
2. "Utmost good faith" (uberrimae fidei) requires the applicant to:
A) Pay premiums on time
B) Disclose all material facts even if not asked
C) Name a beneficiary
D) Accept policy dividends
Answer: B) Disclose all material facts even if not asked
Explanation: Utmost good faith means both parties act honestly. The applicant
must disclose all material facts that could affect the insurer's decision.[reference:1]
3. What distinguishes a conditional contract from other contracts?
A) Only the insured can cancel
B) Performance depends on certain conditions (e.g., proof of loss)
C) Premiums are adjustable
D) It requires a witness
Answer: B) Performance depends on certain conditions (e.g., proof of loss)
,Explanation: An insurance contract is conditional because the insurer's promise
to pay is contingent on the insured fulfilling conditions (e.g., notice of
claim, proof of loss).[reference:2]
4. In insurance, "indemnity" means:
A) The insured must have an insurable interest
B) The insured is restored to the same financial position before the loss
C) The insurer can cancel the policy
D) The agent receives a commission
Answer: B) The insured is restored to the same financial position before the
loss
Explanation: Indemnity means the insured is restored to the same financial
position they were in before the loss occurred, no better and no worse.[reference:3]
5. What is "insurable interest" in insurance?
A) The interest the insurer has in collecting premiums
B) A financial or emotional interest in the continued life or well-being of
the insured
C) The interest the agent has in selling the policy
D) The interest the beneficiary has in receiving the death benefit
Answer: B) A financial or emotional interest in the continued life or
well-being of the insured
Explanation: Insurable interest exists when the policyholder would suffer a
financial or emotional loss from the death or injury of the insured. It is
required at the time of policy application and ensures the policy is not a
gambling contract.[reference:4]
, 6. A "aleatory contract" is one in which:
A) The values exchanged are unequal
B) Both parties exchange equal values
C) Only the insured can cancel
D) The contract is guaranteed
Answer: A) The values exchanged are unequal
Explanation: An aleatory contract is one where the values exchanged by the
parties are unequal. In insurance, the insured pays a small premium while the
insurer may pay a large benefit if a loss occurs.
7. The principle of "subrogation" allows the insurer to:
A) Deny all claims
B) Pursue recovery from a third party that caused the loss
C) Cancel the policy at any time
D) Increase premiums without notice
Answer: B) Pursue recovery from a third party that caused the loss
Explanation: Subrogation gives the insurer the right to pursue recovery from
a third party responsible for the loss, after paying the insured's claim. This
prevents the insured from collecting twice.
8. A "representation" in insurance is:
A) A statement made by the insurer
B) A statement made by the applicant that is believed to be true
C) A guarantee by the applicant
D) A policy provision
