PRIMERICA LOUISIANA LIFE INSURANCE LICENSING
EXAM WITH 100% CORRECT ANSWERS & RATIONALES
| 2023/2024 EDITION | GUARANTEED PASS
1. Which of the following best describes an insurance company that has been formed under
the laws of this state?
A. Sovereign
B. Alien
C. Foreign
D. Domestic ✔
Correct Answer: D
Rationale: A company is domestic when doing business within the state in which it is
incorporated.
2. Which of the following factors is NOT considered by an underwriter when determining
premium rates for an individual seeking insurance?
A. Medical history
B. Sex
C. Age
D. Race ✔
Correct Answer: D
Rationale: Race, religion, sexual orientation, etc., are factors that cannot be used because there
,is not sound statistical data to show they affect the probability of loss; they are considered
discriminatory.
3. In insurance transactions, 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
Correct Answer: A
Rationale: An agent's fiduciary responsibility includes handling insurer funds in a trust capacity.
4. 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
Correct Answer: B
Rationale: Express powers are written into the contract between the insurer and the agent.
,5. Insurance policies are not drawn up through negotiations, and an insured has little to say
about its provisions. What contract characteristic does this describe?
A. Unilateral
B. Conditional
C. Personal
D. Adhesion ✔
Correct Answer: D
Rationale: A contract of adhesion is prepared only by the insurer; the insured's only option is to
accept or reject the policy as written.
6. 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
Correct Answer: C
Rationale: Only stock insurance companies are owned and controlled by stockholders.
7. Which of the following best describes the concept that the insured pays a small amount
of premium for a large amount of risk on the part of the insurance company?
, A. Subrogation
B. Warranty
C. Aleatory ✔
D. Adhesion
Correct Answer: C
Rationale: An insurance contract is an aleatory contract in that it requires a relatively small
amount of premium for a large risk.
8. 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 what type of insurer did she purchase the policy?
A. Mutual ✔
B. Reciprocal
C. Nonprofit service organization
D. Stock
Correct Answer: A
Rationale: Funds not paid out after paying claims and other operating costs are returned to the
policy owners in the form of a dividend. If all funds are paid out, no dividends are paid.
9. Following a career change, an insured implements a healthier lifestyle. Which method of
dealing with risk does this scenario describe?
EXAM WITH 100% CORRECT ANSWERS & RATIONALES
| 2023/2024 EDITION | GUARANTEED PASS
1. Which of the following best describes an insurance company that has been formed under
the laws of this state?
A. Sovereign
B. Alien
C. Foreign
D. Domestic ✔
Correct Answer: D
Rationale: A company is domestic when doing business within the state in which it is
incorporated.
2. Which of the following factors is NOT considered by an underwriter when determining
premium rates for an individual seeking insurance?
A. Medical history
B. Sex
C. Age
D. Race ✔
Correct Answer: D
Rationale: Race, religion, sexual orientation, etc., are factors that cannot be used because there
,is not sound statistical data to show they affect the probability of loss; they are considered
discriminatory.
3. In insurance transactions, 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
Correct Answer: A
Rationale: An agent's fiduciary responsibility includes handling insurer funds in a trust capacity.
4. 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
Correct Answer: B
Rationale: Express powers are written into the contract between the insurer and the agent.
,5. Insurance policies are not drawn up through negotiations, and an insured has little to say
about its provisions. What contract characteristic does this describe?
A. Unilateral
B. Conditional
C. Personal
D. Adhesion ✔
Correct Answer: D
Rationale: A contract of adhesion is prepared only by the insurer; the insured's only option is to
accept or reject the policy as written.
6. 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
Correct Answer: C
Rationale: Only stock insurance companies are owned and controlled by stockholders.
7. Which of the following best describes the concept that the insured pays a small amount
of premium for a large amount of risk on the part of the insurance company?
, A. Subrogation
B. Warranty
C. Aleatory ✔
D. Adhesion
Correct Answer: C
Rationale: An insurance contract is an aleatory contract in that it requires a relatively small
amount of premium for a large risk.
8. 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 what type of insurer did she purchase the policy?
A. Mutual ✔
B. Reciprocal
C. Nonprofit service organization
D. Stock
Correct Answer: A
Rationale: Funds not paid out after paying claims and other operating costs are returned to the
policy owners in the form of a dividend. If all funds are paid out, no dividends are paid.
9. Following a career change, an insured implements a healthier lifestyle. Which method of
dealing with risk does this scenario describe?
