CA LIFE EXAM - PSI Comprehensive
Questions (Frequently Tested) with
Verified Answers Graded A+
A participating company is also referred to as which type of insurer? - Answer: Mutual insurer
An insurer owned by its policyholders, is called a - Answer: Mutual insurer
What is a participating life insurance policy? - Answer: Contract that allows the policyowner to
receive a share of surplus in the form of policy dividends
An insurer enter into a contract with a third-party to ensure itself against losses from insurance
policies it issues. What is this agreement called? - Answer: Reinsurance
John owns an insurance company that gives him the right to share and then sure surplus. What
kind of policy is this? - Answer: Participating
Which of the following is not a characteristic of reinsurance? - Answer: Increases the unearned
premium reserved
Which of the following is not a benefit of insurance? - Answer: Losses due to fraud are
eliminated
When a mutual insurer becomes a stock company, the process is called - Answer:
Demutualization
,Which of the following is a contract that involves one party which indemnifies another one a
loss arises from an unknown event? - Answer: Insurance policy
Which of the following is an insurer established by a parent company's loss exposure's? -
Answer: Captive insurers
Which of the following is not considered to be a definition for the term "loss"? - Answer:
Probability that an event will occur
Which of the following is not considered a definition of a risk? - Answer: The cause of loss
Which of the following best describes the statement; " the more times, and event is repeated,
the more predictable the outcome becomes"? - Answer: Law of large numbers
Which of the following would not be accomplished with the purchase of an insurance policy? -
Answer: Risk is eliminated
Which of the following is a situation where there is a possibility of either a loss or gain? -
Answer: Speculative risk
Which of the following is any situation that presents the possibility of a loss? - Answer: Loss
An insurer having a large number of similar exposure units is considered important because: -
Answer: the greater the number insured, the more accurately that is her can predict losses &
set appropriate premiums
Which of these statements correctly describes risks? - Answer: Pure risk is the only insurable
risk
, Which type of risk is gambling? - Answer: Speculative risk
Moral hazard is described as the: - Answer: increased chance of a loss because of an insured's
dishonest tendencies
All of the following circumstances must be met for los retention to be an effective, risk
management technique, except - Answer: Probability of loss is unknown
All of the following circumstances must be met for lost attention to be an effective risk
management technique, except - Answer: Probability of loss is unknown
After a policy has lapsed, which provision allows the insurer to continue coverage - Answer:
Reinstatement provision
In a life insurance policy, the entire contract consists of - Answer: policy and attached
application
Which policy provision protects the policy owner from unintentional lapse of the contract? -
Answer: Grace period
Which of the following is not a common life insurance policy later? - Answer: Extended term
What an accidental death benefit is added to a whole life policy, how does this affect the
policies cash value? - Answer: Policies, cash value is not affected
A life insurance policy can be surrendered for its cash value under which policy provision? -
Answer: Nonforfeiture options
Questions (Frequently Tested) with
Verified Answers Graded A+
A participating company is also referred to as which type of insurer? - Answer: Mutual insurer
An insurer owned by its policyholders, is called a - Answer: Mutual insurer
What is a participating life insurance policy? - Answer: Contract that allows the policyowner to
receive a share of surplus in the form of policy dividends
An insurer enter into a contract with a third-party to ensure itself against losses from insurance
policies it issues. What is this agreement called? - Answer: Reinsurance
John owns an insurance company that gives him the right to share and then sure surplus. What
kind of policy is this? - Answer: Participating
Which of the following is not a characteristic of reinsurance? - Answer: Increases the unearned
premium reserved
Which of the following is not a benefit of insurance? - Answer: Losses due to fraud are
eliminated
When a mutual insurer becomes a stock company, the process is called - Answer:
Demutualization
,Which of the following is a contract that involves one party which indemnifies another one a
loss arises from an unknown event? - Answer: Insurance policy
Which of the following is an insurer established by a parent company's loss exposure's? -
Answer: Captive insurers
Which of the following is not considered to be a definition for the term "loss"? - Answer:
Probability that an event will occur
Which of the following is not considered a definition of a risk? - Answer: The cause of loss
Which of the following best describes the statement; " the more times, and event is repeated,
the more predictable the outcome becomes"? - Answer: Law of large numbers
Which of the following would not be accomplished with the purchase of an insurance policy? -
Answer: Risk is eliminated
Which of the following is a situation where there is a possibility of either a loss or gain? -
Answer: Speculative risk
Which of the following is any situation that presents the possibility of a loss? - Answer: Loss
An insurer having a large number of similar exposure units is considered important because: -
Answer: the greater the number insured, the more accurately that is her can predict losses &
set appropriate premiums
Which of these statements correctly describes risks? - Answer: Pure risk is the only insurable
risk
, Which type of risk is gambling? - Answer: Speculative risk
Moral hazard is described as the: - Answer: increased chance of a loss because of an insured's
dishonest tendencies
All of the following circumstances must be met for los retention to be an effective, risk
management technique, except - Answer: Probability of loss is unknown
All of the following circumstances must be met for lost attention to be an effective risk
management technique, except - Answer: Probability of loss is unknown
After a policy has lapsed, which provision allows the insurer to continue coverage - Answer:
Reinstatement provision
In a life insurance policy, the entire contract consists of - Answer: policy and attached
application
Which policy provision protects the policy owner from unintentional lapse of the contract? -
Answer: Grace period
Which of the following is not a common life insurance policy later? - Answer: Extended term
What an accidental death benefit is added to a whole life policy, how does this affect the
policies cash value? - Answer: Policies, cash value is not affected
A life insurance policy can be surrendered for its cash value under which policy provision? -
Answer: Nonforfeiture options
