MASS STATE LIFE INSURANCE EXAM
2025 QUESTIONS AND ANSWERS
Which of the following describes a participating life insurance policy? - ANS A participating
life policy is one in which the policyowner receives dividends deriving from the company's
divisible surplus
What type of reinsurance contract between two insurers involves an automatic sharing of the
risks assumed? - ANS Under treaty reinsurance, each party automatically accepts specific
percentages of the insurer's business.
At what point must a life insurance applicant be informed of their rights that fall under the Fair
Credit Reporting Act? - ANS Upon completion of the application
The State Guaranty Association guarantees - ANS that a claim will be paid if an admitted
insurer becomes insolvent
Dividends from a mutual insurance company are paid to whom? - ANS Policyholders
What is considered the accounting measurement of an insurance company's future obligations
to its policyowners? - ANS reserves
A group-owned insurance company that is formed to assume and spread the liability risks of its
members is known as a - ANS risk retention group
Which of the following is a syndicate established by a group of insurers to share underwriting
duties? - ANS Lloyd's organization
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,An agent's authority to bind an insurer to an insurance contract may be granted in the -
ANS agent's contract and the insurance company's appointment
Dividends from a stock insurance company are normally sent to - ANS shareholders
Law of Large numbers - ANS -insurance is based on the sharing of risks among a large group
of people
-states that the larger the number of people, the more predictable the actual losses will be
-companies use this data to calculate rates
Speculative risk - ANS -involves opportunity for either loss or gain
-not covered by insurance companies
pure risk - ANS -a situation that can only result in a loss, there is no opportunity for financial
gain
-only type of risk that is insurable
treatment of risk through: avoidance - ANS simply avoiding as many risks as possible
-effective but not always practical
treatment of risk through- reduction - ANS since we cannot avoid risk entirely we often
attempt to lessen the possibility of a loss by taking acting to reduce the risk
-
treatment of risk through- sharing - ANS when a group of individuals or businesses with
similar exposures share the losses that occur within that group
-reciprocal insurance exchange is a formal risk sharing arrangement
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,treatment of risk through- retention - ANS also known as self-insurance: when individuals
have the financial ability to fund losses by themselves when they occur
treatment of risk through- transfer - ANS the most effective way to handle risk
- risk is transferred to another party - insurance is the most common method of transferring risk
from an individual or group to an insurance company
elements of insurable risk - ANS -must be due to chance
-cannot be catastrophic
-must be randomly selected
• Loss exposure to be insured must be large - Insurance company must be able to predict
loss ( based on law of large numbers)
- Loss must be definite and measurable - Time, place, amount, and when payable
nature of insurance - ANS -to provide financial protection against losses that may be incurred
due to a chance happening or event such as death, illness, or accident
-protection is provided through an insurance policy which is a simple device for accumulating
funds to meet these uncertain losses
ABC Company is attempting to minimize the severity of potential losses within its company. The
company is engaged in risk - ANS Risk reduction can reduce the chance that a particular loss
will occur, or it can reduce the amount of a potential loss if it occurs.
How can an insurance company minimize exposure to loss? - ANS Many insurers are able to
minimize exposure to loss by reinsuring risks.
For insurance purposes, similar objects which are exposed to the same group of perils are
referred to as - ANS Similar objects of insurance that are exposed to the same group of perils
are called homogeneous exposure units.
Which of the following can be defined as "the potential for loss"? - ANS risk
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, An insurer has a contractual agreement which transfers a portion of its risk exposure to another
insurer. What type of contractual arrangement is this? - ANS Reinsurance contracts accept a
portion of the risk underwritten by another insurer who has contracted for the entire coverage
amount.
Which of the following can be defined as a cause of a loss? - ANS peril
What type of risk involves the potential for loss and the possibility for gain? -
ANS speculative
Purchasing insurance is an example of risk - ANS transference
A business becoming incorporated is an example of risk ____. - ANS transfer
Which of the following is NOT an example of risk retention? - ANS Not doing a business deal
after deciding it would be too risky
legal contract must have: offer and acceptance - ANS -an offer is made when the applicant
submits an application for insurance to the insurance company
-the offer is accepted after it has been approved by the insurance company's underwriters
legal contract must have: consideration - ANS something of value that each party gives to the
other
-on part of insured: payment of premium
-on part of insurance company: promise to pay in event of loss
legal contract must have: legal purpose - ANS -must be legal and not against public policy
-has legal purpose if contract has a insurable interests and the insured has provided written
consent
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2025 QUESTIONS AND ANSWERS
Which of the following describes a participating life insurance policy? - ANS A participating
life policy is one in which the policyowner receives dividends deriving from the company's
divisible surplus
What type of reinsurance contract between two insurers involves an automatic sharing of the
risks assumed? - ANS Under treaty reinsurance, each party automatically accepts specific
percentages of the insurer's business.
At what point must a life insurance applicant be informed of their rights that fall under the Fair
Credit Reporting Act? - ANS Upon completion of the application
The State Guaranty Association guarantees - ANS that a claim will be paid if an admitted
insurer becomes insolvent
Dividends from a mutual insurance company are paid to whom? - ANS Policyholders
What is considered the accounting measurement of an insurance company's future obligations
to its policyowners? - ANS reserves
A group-owned insurance company that is formed to assume and spread the liability risks of its
members is known as a - ANS risk retention group
Which of the following is a syndicate established by a group of insurers to share underwriting
duties? - ANS Lloyd's organization
1 Copyright ©2025 FYNDLAY ALL RIGHTS RESERVED.
,An agent's authority to bind an insurer to an insurance contract may be granted in the -
ANS agent's contract and the insurance company's appointment
Dividends from a stock insurance company are normally sent to - ANS shareholders
Law of Large numbers - ANS -insurance is based on the sharing of risks among a large group
of people
-states that the larger the number of people, the more predictable the actual losses will be
-companies use this data to calculate rates
Speculative risk - ANS -involves opportunity for either loss or gain
-not covered by insurance companies
pure risk - ANS -a situation that can only result in a loss, there is no opportunity for financial
gain
-only type of risk that is insurable
treatment of risk through: avoidance - ANS simply avoiding as many risks as possible
-effective but not always practical
treatment of risk through- reduction - ANS since we cannot avoid risk entirely we often
attempt to lessen the possibility of a loss by taking acting to reduce the risk
-
treatment of risk through- sharing - ANS when a group of individuals or businesses with
similar exposures share the losses that occur within that group
-reciprocal insurance exchange is a formal risk sharing arrangement
2 Copyright ©2025 FYNDLAY ALL RIGHTS RESERVED.
,treatment of risk through- retention - ANS also known as self-insurance: when individuals
have the financial ability to fund losses by themselves when they occur
treatment of risk through- transfer - ANS the most effective way to handle risk
- risk is transferred to another party - insurance is the most common method of transferring risk
from an individual or group to an insurance company
elements of insurable risk - ANS -must be due to chance
-cannot be catastrophic
-must be randomly selected
• Loss exposure to be insured must be large - Insurance company must be able to predict
loss ( based on law of large numbers)
- Loss must be definite and measurable - Time, place, amount, and when payable
nature of insurance - ANS -to provide financial protection against losses that may be incurred
due to a chance happening or event such as death, illness, or accident
-protection is provided through an insurance policy which is a simple device for accumulating
funds to meet these uncertain losses
ABC Company is attempting to minimize the severity of potential losses within its company. The
company is engaged in risk - ANS Risk reduction can reduce the chance that a particular loss
will occur, or it can reduce the amount of a potential loss if it occurs.
How can an insurance company minimize exposure to loss? - ANS Many insurers are able to
minimize exposure to loss by reinsuring risks.
For insurance purposes, similar objects which are exposed to the same group of perils are
referred to as - ANS Similar objects of insurance that are exposed to the same group of perils
are called homogeneous exposure units.
Which of the following can be defined as "the potential for loss"? - ANS risk
3 Copyright ©2025 FYNDLAY ALL RIGHTS RESERVED.
, An insurer has a contractual agreement which transfers a portion of its risk exposure to another
insurer. What type of contractual arrangement is this? - ANS Reinsurance contracts accept a
portion of the risk underwritten by another insurer who has contracted for the entire coverage
amount.
Which of the following can be defined as a cause of a loss? - ANS peril
What type of risk involves the potential for loss and the possibility for gain? -
ANS speculative
Purchasing insurance is an example of risk - ANS transference
A business becoming incorporated is an example of risk ____. - ANS transfer
Which of the following is NOT an example of risk retention? - ANS Not doing a business deal
after deciding it would be too risky
legal contract must have: offer and acceptance - ANS -an offer is made when the applicant
submits an application for insurance to the insurance company
-the offer is accepted after it has been approved by the insurance company's underwriters
legal contract must have: consideration - ANS something of value that each party gives to the
other
-on part of insured: payment of premium
-on part of insurance company: promise to pay in event of loss
legal contract must have: legal purpose - ANS -must be legal and not against public policy
-has legal purpose if contract has a insurable interests and the insured has provided written
consent
4 Copyright ©2025 FYNDLAY ALL RIGHTS RESERVED.
