MASS STATE LIFE INSURANCE EXAM
QUESTIONS AND ANSWERS LATEST 2025-2026
UPDATE| GRADE A+ GUARANTEE
Which of the following can be defined as "the potential for loss"? -
Answer-risk
An insurer has a contractual agreement which transfers a portion of its
risk exposure to another insurer. What type of contractual arrangement is
this? - Answer-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? - Answer-
peril
What type of risk involves the potential for loss and the possibility for
gain? - Answer-speculative
Purchasing insurance is an example of risk - Answer-transference
A business becoming incorporated is an example of risk ____. -
Answer-transfer
Which of the following is NOT an example of risk retention? - Answer-
Not doing a business deal after deciding it would be too risky
, legal contract must have: offer and acceptance - Answer--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 - Answer-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 - Answer--must be legal and not
against public policy
-has legal purpose if contract has a insurable interests and the insured
has provided written consent
legal contract must have: competent parties - Answer--all parties must
be of legal competence
-must be of legal age, mentally capable of understanding the terms, and
not under the influence of drugs or alcohol
specifal features of insurance contracts: aleatory - Answer-there is not
an equal exchange of value
-premiums paid by the insured are small in relation to the amount that
will be paid by the insurance company, in the event of a loss
, specifal features of insurance contracts: adhesion - Answer-also known
as "take it or leave it agreements" because they're prepared by only one
party, the insurance company
-accepted or rejected by the other party (the applicant) with no
negotiations or changes
specifal features of insurance contracts: unilateral - Answer-one sided
agreement in which only one party (the insurance company) is legally
bound to do anything
-policy owner is under no legally binding promise to pay premiums,
however the insurance company is legally bound to pay losses covered
by the policy
-if the policy owner does not pay their premiums, the insurance
company does have the right to terminate the insurance policy
personal contract - Answer-insurance contracts are personal contracts
between an individual and the insurance company, and cannot transfer
owner ship without the insurance company's written consent
conditional - Answer-insurance contracts are conditional because
certain contracts must be met by all parties when a loss occurs,
otherwise the contract would not be legally enforceable
-if the policy owner is past due on his payments and the insured dies, the
insurance company does not have to pay the death benefit because a
condition was not met
, value or indemnity - Answer--life insurance is a valued contract, which
pays a stated amount, regardless of the actual loss incurred
-health insurance is an indemnity contract (only pays equal to the loss)
-with health insurance you are not allowed to make a profit
utmost good faith - Answer--implies that there will be no fraud,
misrepresentation, or concealment, between the parties as it pertains to
insurance policies
-both the insurance company and the policy owner must be able to rely
on the other for relevant and accurate information
-policy owner is expected to provide accurate information on the
application for insurance
-insurance company must clearly and truthfully describe policy features
and benefits, and they must not conceal or mislead the insured
warranty - Answer-statements that are guaranteed to be true and are a
part of the legal contract
representation - Answer-statements believed to be true, to the best of
one's knowledge, but they are not guaranteed to be true for insurance
purposes
-answers the applicant for insurance gives to the questions on the
insurance application
-untrue statements on application are considered misrepresentations and
could void the contract
QUESTIONS AND ANSWERS LATEST 2025-2026
UPDATE| GRADE A+ GUARANTEE
Which of the following can be defined as "the potential for loss"? -
Answer-risk
An insurer has a contractual agreement which transfers a portion of its
risk exposure to another insurer. What type of contractual arrangement is
this? - Answer-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? - Answer-
peril
What type of risk involves the potential for loss and the possibility for
gain? - Answer-speculative
Purchasing insurance is an example of risk - Answer-transference
A business becoming incorporated is an example of risk ____. -
Answer-transfer
Which of the following is NOT an example of risk retention? - Answer-
Not doing a business deal after deciding it would be too risky
, legal contract must have: offer and acceptance - Answer--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 - Answer-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 - Answer--must be legal and not
against public policy
-has legal purpose if contract has a insurable interests and the insured
has provided written consent
legal contract must have: competent parties - Answer--all parties must
be of legal competence
-must be of legal age, mentally capable of understanding the terms, and
not under the influence of drugs or alcohol
specifal features of insurance contracts: aleatory - Answer-there is not
an equal exchange of value
-premiums paid by the insured are small in relation to the amount that
will be paid by the insurance company, in the event of a loss
, specifal features of insurance contracts: adhesion - Answer-also known
as "take it or leave it agreements" because they're prepared by only one
party, the insurance company
-accepted or rejected by the other party (the applicant) with no
negotiations or changes
specifal features of insurance contracts: unilateral - Answer-one sided
agreement in which only one party (the insurance company) is legally
bound to do anything
-policy owner is under no legally binding promise to pay premiums,
however the insurance company is legally bound to pay losses covered
by the policy
-if the policy owner does not pay their premiums, the insurance
company does have the right to terminate the insurance policy
personal contract - Answer-insurance contracts are personal contracts
between an individual and the insurance company, and cannot transfer
owner ship without the insurance company's written consent
conditional - Answer-insurance contracts are conditional because
certain contracts must be met by all parties when a loss occurs,
otherwise the contract would not be legally enforceable
-if the policy owner is past due on his payments and the insured dies, the
insurance company does not have to pay the death benefit because a
condition was not met
, value or indemnity - Answer--life insurance is a valued contract, which
pays a stated amount, regardless of the actual loss incurred
-health insurance is an indemnity contract (only pays equal to the loss)
-with health insurance you are not allowed to make a profit
utmost good faith - Answer--implies that there will be no fraud,
misrepresentation, or concealment, between the parties as it pertains to
insurance policies
-both the insurance company and the policy owner must be able to rely
on the other for relevant and accurate information
-policy owner is expected to provide accurate information on the
application for insurance
-insurance company must clearly and truthfully describe policy features
and benefits, and they must not conceal or mislead the insured
warranty - Answer-statements that are guaranteed to be true and are a
part of the legal contract
representation - Answer-statements believed to be true, to the best of
one's knowledge, but they are not guaranteed to be true for insurance
purposes
-answers the applicant for insurance gives to the questions on the
insurance application
-untrue statements on application are considered misrepresentations and
could void the contract
