Primerica Life Insurance Exam
Questions and Correct Answers
2024/2025
What is insurance? - CORRECT ANSWER-Transfer of the possibility of loss (risk) to an
insurance company.
What is a risk? - CORRECT ANSWER-The uncertainty of financial loss
There are two types of loss - CORRECT ANSWER-Pure and Speculative
Which type of loss is insurable? - CORRECT ANSWER-Pure
Why is Pure loss insurable? - CORRECT ANSWER-Loss must be financial and
uncertain. No financial gain can occur.
What causes loss? - CORRECT ANSWER-Peril; such as fire, accident or flood
What causes a peril? - CORRECT ANSWER-A hazard
What is a hazard? - CORRECT ANSWER-Increases the likelihood of a loss; such as
smoking
What is the concept called, that predicts the appropriate number of deaths that should
occur within a similar group
of people (exposure) within a given period of time? - CORRECT ANSWER-Law of
Large Numbers
What is adverse selection? - CORRECT ANSWER-People in bad health keep their
policy in force longer than people in good health
As an agent, you are a legal representative of the ______________. - CORRECT
ANSWER-company
The person who pays for the policy of insurance is the - CORRECT ANSWER-policy
owner
The _____________ is the person who receives the benefits from the insurance policy -
CORRECT ANSWER-beneficiary
The person covered by the insurance policy is the ____________. - CORRECT
ANSWER-insured
, The insurance company is the ___________. - CORRECT ANSWER-insurer
To buy insurance, the policyowner must have ______________ in the insured at the
_________________________________________________. - CORRECT ANSWER-
insurable interest; time of purchase but not at
time of insured's death.
The 5 recognizable areas of insurable interest are ___________. - CORRECT
ANSWER-1. your own life
2. family members
3. business partners
4. key employee
5.financial obligation.
What is person called who holds a position of special trust and confidence? -
CORRECT ANSWER-Fiduciary
Waiver vs. Estoppel - CORRECT ANSWER-Waiver is when you voluntarily give up your
legal right. Estoppel is when you are denied the right to enforce a legal right that you
have previously given up. Estoppel AKA The Loss of Defense
What are the business uses of life insurance? - CORRECT ANSWER-1. Key Employee
2. Buy and Sell Agreement
3. Cross Purchase Plan
4. Split Dollar Plan
Key Employee - CORRECT ANSWER-Company is owner and Beneficiary
Employee is Insured Premium NOT tax deductible to Company Third Party Ownership
Buy and Sell Agreement - CORRECT ANSWER-NOT INSURANCE - A legal document
that states WHO may purchase a deceased partners share of the business and for
HOW MUCH MONEY
Life Insurance can be used to fund a Buy and Sell Agreement
Drawn up by an Attorney
Cross Purchase Plan - CORRECT ANSWER-Take the Company Value and divide by
number of Owners Each Owner buys a policy on the other Owners, naming himself as
beneficiary.
Split Dollar Plan - CORRECT ANSWER-Employee and Owner share in Premium and
DB Third Party Ownership
What is meant by third party ownership - CORRECT ANSWER-Policy is owned by
someone other than the Insured.
Questions and Correct Answers
2024/2025
What is insurance? - CORRECT ANSWER-Transfer of the possibility of loss (risk) to an
insurance company.
What is a risk? - CORRECT ANSWER-The uncertainty of financial loss
There are two types of loss - CORRECT ANSWER-Pure and Speculative
Which type of loss is insurable? - CORRECT ANSWER-Pure
Why is Pure loss insurable? - CORRECT ANSWER-Loss must be financial and
uncertain. No financial gain can occur.
What causes loss? - CORRECT ANSWER-Peril; such as fire, accident or flood
What causes a peril? - CORRECT ANSWER-A hazard
What is a hazard? - CORRECT ANSWER-Increases the likelihood of a loss; such as
smoking
What is the concept called, that predicts the appropriate number of deaths that should
occur within a similar group
of people (exposure) within a given period of time? - CORRECT ANSWER-Law of
Large Numbers
What is adverse selection? - CORRECT ANSWER-People in bad health keep their
policy in force longer than people in good health
As an agent, you are a legal representative of the ______________. - CORRECT
ANSWER-company
The person who pays for the policy of insurance is the - CORRECT ANSWER-policy
owner
The _____________ is the person who receives the benefits from the insurance policy -
CORRECT ANSWER-beneficiary
The person covered by the insurance policy is the ____________. - CORRECT
ANSWER-insured
, The insurance company is the ___________. - CORRECT ANSWER-insurer
To buy insurance, the policyowner must have ______________ in the insured at the
_________________________________________________. - CORRECT ANSWER-
insurable interest; time of purchase but not at
time of insured's death.
The 5 recognizable areas of insurable interest are ___________. - CORRECT
ANSWER-1. your own life
2. family members
3. business partners
4. key employee
5.financial obligation.
What is person called who holds a position of special trust and confidence? -
CORRECT ANSWER-Fiduciary
Waiver vs. Estoppel - CORRECT ANSWER-Waiver is when you voluntarily give up your
legal right. Estoppel is when you are denied the right to enforce a legal right that you
have previously given up. Estoppel AKA The Loss of Defense
What are the business uses of life insurance? - CORRECT ANSWER-1. Key Employee
2. Buy and Sell Agreement
3. Cross Purchase Plan
4. Split Dollar Plan
Key Employee - CORRECT ANSWER-Company is owner and Beneficiary
Employee is Insured Premium NOT tax deductible to Company Third Party Ownership
Buy and Sell Agreement - CORRECT ANSWER-NOT INSURANCE - A legal document
that states WHO may purchase a deceased partners share of the business and for
HOW MUCH MONEY
Life Insurance can be used to fund a Buy and Sell Agreement
Drawn up by an Attorney
Cross Purchase Plan - CORRECT ANSWER-Take the Company Value and divide by
number of Owners Each Owner buys a policy on the other Owners, naming himself as
beneficiary.
Split Dollar Plan - CORRECT ANSWER-Employee and Owner share in Premium and
DB Third Party Ownership
What is meant by third party ownership - CORRECT ANSWER-Policy is owned by
someone other than the Insured.
