California Life Insurance State Exam Simulator/
199 Q&A/ 2024-2025.
Primary insurer - Answer: AAA Insurance Company has transferred a portion of its loss exposure to BBB
Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called?
Tertiary insurer
Primary insurer
Secondary insurer
Captive insurer
Contract that allows the policyowner to receive a share of surplus in the form of policy dividends -
Answer: What is a participating life insurance policy?
Contract that gives beneficiaries the right to participate in any dividends
Agreement that insures two or more lives
Agreement that allows two or more beneficiaries to share in the death benefit
Contract that allows the policyowner to receive a share of surplus in the form of policy dividends
Participating - Answer: John owns an insurance policy that gives him the right to share in the insurer's
surplus. What kind of policy is this?
Contributory
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,Nonparticipating
Surplus
Participating
Increases the unearned premium reserve - Answer: Which of the following is NOT a characteristic of
reinsurance?
Protects against a very large claim
Increases the unearned premium reserve
A specialized branch of the insurance industry
Enables insurer to meet certain objectives
Marketing - Answer: One important function of an insurance company is to identify and sell to potential
customers. Which of the BEST describes this function?
Regulation
Marketing
Underwriting
Reinsurance
It is the distribution of excess of funds accumulated by the insurer on participating policies - Answer:
Which of the following statements regarding a life insurance policy dividend is TRUE?
It is a stockholders return on his investment in the company
It is the distribution of excess of funds accumulated by the insurer on participating policies
It represents the built-up of cash value in a permanent insurance policy
It represents a refund of overcharged premium in a non-participating whole life policy
Losses due to fraud are eliminated - Answer: Which of the following is NOT a benefit of insurance?
Source of investment funds
Makes a loss whole again
Reduces the uncertainty of loss exposures
Losses due to fraud are eliminated
Mutual insurer - Answer: An insurer owned by its policyholders is called a
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,Multi-line insurer
Mutual insurer
Reinsurer
Stock insurer
One party is restored to the same financial position the party was in before the loss occurred - Answer:
Which of the following statements statements correctly describes a contract of indemnity?
One party is restored to the same financial position the party was in before the loss occurred
The unequal exchange of value or consideration for both parties
One party (the insurance company) prepares the contract with no negotiation between the application
and insurer
Only one party (the insurer) makes any kind of enforceable promise
Probability of loss - Answer: Which of the following is NOT required in the content of a policy?
Parties involved in the contract
Period to which the coverage exists
Probability of loss
Risk insured against
Equal consideration is required between the involved parties - Answer: Which of the following is NOT a
requirement of a contract?
Parties involved must be competent
Equal consideration is required between the involved parties
Contract must have a legal purpose
Offer and acceptance must be involved
Contract may be accepted or rejected by the insured - Answer: Which statement is CORRECT when
describing a contract of adhesion?
Contract may be accepted or rejected by the insured
Contract involves negotiation between insurer and insured
Any confusing language in the contract would be interpreted in favor of the insurer
Contract cannot be modified by the insurer
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, Implied authority - Answer: Reasonably necessary acts that an agent must perform for carrying out
his/her expressly authorized duties are covered by an agent's
Express authority
Implied authority
Apparent authority
Evident authority
Indemnity - Answer: Restoring an insured to the same condition as before a loss is an example of the
principle of
Utmost good faith
Adhesion
Legal purpose
Indemnity
Rescinding the contract - Answer: Which course of action is the insurer entitled to when deliberate
concealment is committed by the insured?
Rescinding the contract
Charge a higher premium
Charge a penalty
Nothing
The insured and the insurer contribute equally to the contract - Answer: Which of the following
statements about aleatory contracts is NOT true?
Insurance contracts are considered aleatory
The insured and the insurer have the potential for unequal contributions
The insured and the insurer contribute equally to the contract
Aleatory contracts are conditioned upon the occurrence of an event
Fiduciary - Answer: When handling premiums for an insured, an agent is acting in which capacity?
Adhesion
Fiduciary
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199 Q&A/ 2024-2025.
Primary insurer - Answer: AAA Insurance Company has transferred a portion of its loss exposure to BBB
Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called?
Tertiary insurer
Primary insurer
Secondary insurer
Captive insurer
Contract that allows the policyowner to receive a share of surplus in the form of policy dividends -
Answer: What is a participating life insurance policy?
Contract that gives beneficiaries the right to participate in any dividends
Agreement that insures two or more lives
Agreement that allows two or more beneficiaries to share in the death benefit
Contract that allows the policyowner to receive a share of surplus in the form of policy dividends
Participating - Answer: John owns an insurance policy that gives him the right to share in the insurer's
surplus. What kind of policy is this?
Contributory
Page 1 of 43
,Nonparticipating
Surplus
Participating
Increases the unearned premium reserve - Answer: Which of the following is NOT a characteristic of
reinsurance?
Protects against a very large claim
Increases the unearned premium reserve
A specialized branch of the insurance industry
Enables insurer to meet certain objectives
Marketing - Answer: One important function of an insurance company is to identify and sell to potential
customers. Which of the BEST describes this function?
Regulation
Marketing
Underwriting
Reinsurance
It is the distribution of excess of funds accumulated by the insurer on participating policies - Answer:
Which of the following statements regarding a life insurance policy dividend is TRUE?
It is a stockholders return on his investment in the company
It is the distribution of excess of funds accumulated by the insurer on participating policies
It represents the built-up of cash value in a permanent insurance policy
It represents a refund of overcharged premium in a non-participating whole life policy
Losses due to fraud are eliminated - Answer: Which of the following is NOT a benefit of insurance?
Source of investment funds
Makes a loss whole again
Reduces the uncertainty of loss exposures
Losses due to fraud are eliminated
Mutual insurer - Answer: An insurer owned by its policyholders is called a
Page 2 of 43
,Multi-line insurer
Mutual insurer
Reinsurer
Stock insurer
One party is restored to the same financial position the party was in before the loss occurred - Answer:
Which of the following statements statements correctly describes a contract of indemnity?
One party is restored to the same financial position the party was in before the loss occurred
The unequal exchange of value or consideration for both parties
One party (the insurance company) prepares the contract with no negotiation between the application
and insurer
Only one party (the insurer) makes any kind of enforceable promise
Probability of loss - Answer: Which of the following is NOT required in the content of a policy?
Parties involved in the contract
Period to which the coverage exists
Probability of loss
Risk insured against
Equal consideration is required between the involved parties - Answer: Which of the following is NOT a
requirement of a contract?
Parties involved must be competent
Equal consideration is required between the involved parties
Contract must have a legal purpose
Offer and acceptance must be involved
Contract may be accepted or rejected by the insured - Answer: Which statement is CORRECT when
describing a contract of adhesion?
Contract may be accepted or rejected by the insured
Contract involves negotiation between insurer and insured
Any confusing language in the contract would be interpreted in favor of the insurer
Contract cannot be modified by the insurer
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, Implied authority - Answer: Reasonably necessary acts that an agent must perform for carrying out
his/her expressly authorized duties are covered by an agent's
Express authority
Implied authority
Apparent authority
Evident authority
Indemnity - Answer: Restoring an insured to the same condition as before a loss is an example of the
principle of
Utmost good faith
Adhesion
Legal purpose
Indemnity
Rescinding the contract - Answer: Which course of action is the insurer entitled to when deliberate
concealment is committed by the insured?
Rescinding the contract
Charge a higher premium
Charge a penalty
Nothing
The insured and the insurer contribute equally to the contract - Answer: Which of the following
statements about aleatory contracts is NOT true?
Insurance contracts are considered aleatory
The insured and the insurer have the potential for unequal contributions
The insured and the insurer contribute equally to the contract
Aleatory contracts are conditioned upon the occurrence of an event
Fiduciary - Answer: When handling premiums for an insured, an agent is acting in which capacity?
Adhesion
Fiduciary
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