PRIMERICA LIFE INSURANCE EXAMWITH
100% CORRECT ANSWERS 2023/2024 WITH
RATIONALES GUARANTEED PASS
Which of the following statements is NOT true concerning insurable interest as it applies to life
insurance?
a. a debtor has an insurable interest in the life of a lender
b. business partners have an insurable interest in each other
c. a husband or wife has insurable interest on their spouse
d. an individual has an insurable interest on his or her own life
- ANS -A. a debtor has an insurable interested on the life of a lender
Which of the following statements regarding the taxation of Modified Endowment Contracts is
FALSE?
a. withdrawals are not taxable
b. distributions before age 59 1/2 incur a 10% penalty on policy gains
c. policy loans are taxable distributions
d. accumulations are tax-deferred
- ANS -A. withdrawals are not taxable
If the cash value exceeds the premiums paid in a whole life policy, what are the tax
consequences if the policy is surrendered?
a. the portion that exceeds the premiums paid is taxable
b. the total amount received when the policy is surrendered is taxable
c. the interest earned is taxable
d. the cash value is tax-free
- ANS -A. the portion that exceeds the premiums paid is taxable
Dividends paid by a participating life insurance policy are
a. taxed as long term capital gains
b. received tax-free
c. taxed as ordinary income
d. taxed as capital gains distributions
- ANS -B. received tax-free
Which of the following is not true about qualified retirement plans?
a. qualified plans received favorable tax treatment
,b. contributions made by employers are tax deductible
c. qualified plans can only be offered to company officers
d. contributions accumulate tax free until paid out
- ANS -C. qualified plans an only be offered to company officers
All of the following will reduce the death benefit amount EXCEPT:
a. long term care
b. accelerated death benefits
c. waiver of premium
d. unpaid policy loans
- ANS -C. waiver of premium
What happens when a policy is surrendered for its cash value?
a. the policy can be converted to term coverage
b. coverage ends and the policy cannot be reinstated
c. coverage ends but the policy can be reinstated at any time
d. the policy can be reinstated by paying back all policy loans and premiums
- ANS -D. the policy can be reinstated by paying back all policy loans and premiums
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
the insurer. From what type of insurer did the insured purchase the policy?
a. mutual
b. reciprocal
c. nonprofit service organization
d. stock
- ANS -A. mutual
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
Following a career change, an insured is no longer required to perform many physical activities,
so he has implemented a program where he walks and jogs for 45 minutes each morning. The
insured has also eliminated most fatty foods from his diet. Which method of dealing with risk
does this scenario describe?
a. retention
b. reduction
c. transfer
,d. avoidance
- ANS -B. reduction
the insured's change in lifestyle and habits would likely reduce the chances of health problems
the principal grants authority to an agent through the agent's contract
Which of the following best describes an insurance company that has been formed under the
laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign
- ANS -A. domestic
A company is domestic when doing business within the state in which it is incorporated
which of the following factors is NOT considered by an underwriter when determining the
premium rates for an individual seeking insurance?
a. medical history
b. sex
c. age
d. race
- ANS -D. race
Age, medical history, and sex provide sound statistical date for determining the probability of
loss. Race, religion, sexual orientation, etc. are the factors that cannot be used because there is
not sound statistical data to show that they effect the probability of loss; therefore, they are
considered to be discriminatory
in insurance transactions, fiduciary responsibility means
a. handling insurer funds in a trust capacity
b. maintaining good credit record
c. being liable with respect to payment of claims
d. commingling premiums with agents personal funds
- ANS -A. handling insurer funds in a trust capacity
An agents fiduciary responsibility includes handling insurer funds in a trust capacity
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
- ANS -B. express authority
Express powers are written into the contract between the insurer and the agent
insurance policies are not drawn up though 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
- ANS -D. adhesion
A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or
reject the policy as its written
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
- ANS -C. stock
Only stock insurance companies are owned and controlled by stockholders
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
- ANS -C. aleatory
When an insured makes truthful statements on the application for insurance and pays the
required premium, it is known as which of the following?
a. legal purpose
b. contract of adhesion
c. acceptance
100% CORRECT ANSWERS 2023/2024 WITH
RATIONALES GUARANTEED PASS
Which of the following statements is NOT true concerning insurable interest as it applies to life
insurance?
a. a debtor has an insurable interest in the life of a lender
b. business partners have an insurable interest in each other
c. a husband or wife has insurable interest on their spouse
d. an individual has an insurable interest on his or her own life
- ANS -A. a debtor has an insurable interested on the life of a lender
Which of the following statements regarding the taxation of Modified Endowment Contracts is
FALSE?
a. withdrawals are not taxable
b. distributions before age 59 1/2 incur a 10% penalty on policy gains
c. policy loans are taxable distributions
d. accumulations are tax-deferred
- ANS -A. withdrawals are not taxable
If the cash value exceeds the premiums paid in a whole life policy, what are the tax
consequences if the policy is surrendered?
a. the portion that exceeds the premiums paid is taxable
b. the total amount received when the policy is surrendered is taxable
c. the interest earned is taxable
d. the cash value is tax-free
- ANS -A. the portion that exceeds the premiums paid is taxable
Dividends paid by a participating life insurance policy are
a. taxed as long term capital gains
b. received tax-free
c. taxed as ordinary income
d. taxed as capital gains distributions
- ANS -B. received tax-free
Which of the following is not true about qualified retirement plans?
a. qualified plans received favorable tax treatment
,b. contributions made by employers are tax deductible
c. qualified plans can only be offered to company officers
d. contributions accumulate tax free until paid out
- ANS -C. qualified plans an only be offered to company officers
All of the following will reduce the death benefit amount EXCEPT:
a. long term care
b. accelerated death benefits
c. waiver of premium
d. unpaid policy loans
- ANS -C. waiver of premium
What happens when a policy is surrendered for its cash value?
a. the policy can be converted to term coverage
b. coverage ends and the policy cannot be reinstated
c. coverage ends but the policy can be reinstated at any time
d. the policy can be reinstated by paying back all policy loans and premiums
- ANS -D. the policy can be reinstated by paying back all policy loans and premiums
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
the insurer. From what type of insurer did the insured purchase the policy?
a. mutual
b. reciprocal
c. nonprofit service organization
d. stock
- ANS -A. mutual
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
Following a career change, an insured is no longer required to perform many physical activities,
so he has implemented a program where he walks and jogs for 45 minutes each morning. The
insured has also eliminated most fatty foods from his diet. Which method of dealing with risk
does this scenario describe?
a. retention
b. reduction
c. transfer
,d. avoidance
- ANS -B. reduction
the insured's change in lifestyle and habits would likely reduce the chances of health problems
the principal grants authority to an agent through the agent's contract
Which of the following best describes an insurance company that has been formed under the
laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign
- ANS -A. domestic
A company is domestic when doing business within the state in which it is incorporated
which of the following factors is NOT considered by an underwriter when determining the
premium rates for an individual seeking insurance?
a. medical history
b. sex
c. age
d. race
- ANS -D. race
Age, medical history, and sex provide sound statistical date for determining the probability of
loss. Race, religion, sexual orientation, etc. are the factors that cannot be used because there is
not sound statistical data to show that they effect the probability of loss; therefore, they are
considered to be discriminatory
in insurance transactions, fiduciary responsibility means
a. handling insurer funds in a trust capacity
b. maintaining good credit record
c. being liable with respect to payment of claims
d. commingling premiums with agents personal funds
- ANS -A. handling insurer funds in a trust capacity
An agents fiduciary responsibility includes handling insurer funds in a trust capacity
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
- ANS -B. express authority
Express powers are written into the contract between the insurer and the agent
insurance policies are not drawn up though 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
- ANS -D. adhesion
A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or
reject the policy as its written
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
- ANS -C. stock
Only stock insurance companies are owned and controlled by stockholders
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
- ANS -C. aleatory
When an insured makes truthful statements on the application for insurance and pays the
required premium, it is known as which of the following?
a. legal purpose
b. contract of adhesion
c. acceptance
