PRIMERICA LIFE INSURANCE EXAM PREP COMPLETE
PRACTICE QUESTION BANK (200 QUESTIONS WITH
ANSWERS & RATIONALES)
1. 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. Stock
b. Reciprocal
c. Nonprofit service organization
d. Mutual
Correct Answer: d. Mutual
Rationale: Mutual insurers return unused funds to policyowners as
dividends when claims and expenses are lower than expected. If all
funds are used, no dividend is paid.
2. 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. Transfer
b. Retention
c. Avoidance
,d. Reduction
Correct Answer: d. Reduction
Rationale: The insured is actively reducing the probability of health
issues through lifestyle changes, which is risk reduction.
3. In insurance, an offer is usually made when:
a. An agent explains a policy to a potential applicant
b. The agent hands the policy to the policyholder
c. An applicant submits an application to the insurer
d. The insurer approves the application and receives the initial premium
Correct Answer: c. An applicant submits an application to the insurer
Rationale: The offer in insurance is typically made by the applicant
through the submission of an application. Acceptance occurs when the
insurer approves and issues the policy.
4. The causes of loss insured against in an insurance policy are known
as:
a. Losses
b. Perils
c. Hazards
d. Risks
Correct Answer: b. Perils
Rationale: Perils are the specific causes of loss, such as fire, theft, or
windstorm, that are covered by an insurance policy.
,5. What documentation grants express authority to an agent?
a. Agent's insurance license
b. Agent's contract with the principal
c. Fiduciary contract
d. State provisions
Correct Answer: b. Agent's contract with the principal
Rationale: Express authority is explicitly granted to an agent through
the written contract with the insurer (the principal).
6. Which of the following best describes an insurance company that
has been formed under the laws of this state?
a. Sovereign
b. Foreign
c. Alien
d. Domestic
Correct Answer: d. Domestic
Rationale: A domestic insurer is one incorporated and operating within
the state where it is doing business.
7. Which of the following factors is NOT considered by an underwriter
when determining the premium rates for an individual seeking
insurance?
a. Sex
b. Medical history
c. Race
d. Age
Correct Answer: c. Race
, Rationale: Race is not used because it is discriminatory and lacks sound
statistical basis for determining loss probability. Age, sex, and medical
history are statistically valid.
8. 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
Correct Answer: a. Handling insurer funds in a trust capacity
Rationale: Fiduciary responsibility requires agents to handle insurer and
client funds in a trust capacity, keeping them separate from personal
funds.
9. The authority granted to an agent through the agent's contract is
referred to as:
a. Implied authority
b. Express authority
c. Apparent authority
d. Absolute authority
Correct Answer: b. Express authority
Rationale: Express authority is specifically written into the agent's
contract with the insurer.
10. Insurance policies are not drawn up through negotiations, and an
insured has little to say about its provisions. What contract
PRACTICE QUESTION BANK (200 QUESTIONS WITH
ANSWERS & RATIONALES)
1. 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. Stock
b. Reciprocal
c. Nonprofit service organization
d. Mutual
Correct Answer: d. Mutual
Rationale: Mutual insurers return unused funds to policyowners as
dividends when claims and expenses are lower than expected. If all
funds are used, no dividend is paid.
2. 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. Transfer
b. Retention
c. Avoidance
,d. Reduction
Correct Answer: d. Reduction
Rationale: The insured is actively reducing the probability of health
issues through lifestyle changes, which is risk reduction.
3. In insurance, an offer is usually made when:
a. An agent explains a policy to a potential applicant
b. The agent hands the policy to the policyholder
c. An applicant submits an application to the insurer
d. The insurer approves the application and receives the initial premium
Correct Answer: c. An applicant submits an application to the insurer
Rationale: The offer in insurance is typically made by the applicant
through the submission of an application. Acceptance occurs when the
insurer approves and issues the policy.
4. The causes of loss insured against in an insurance policy are known
as:
a. Losses
b. Perils
c. Hazards
d. Risks
Correct Answer: b. Perils
Rationale: Perils are the specific causes of loss, such as fire, theft, or
windstorm, that are covered by an insurance policy.
,5. What documentation grants express authority to an agent?
a. Agent's insurance license
b. Agent's contract with the principal
c. Fiduciary contract
d. State provisions
Correct Answer: b. Agent's contract with the principal
Rationale: Express authority is explicitly granted to an agent through
the written contract with the insurer (the principal).
6. Which of the following best describes an insurance company that
has been formed under the laws of this state?
a. Sovereign
b. Foreign
c. Alien
d. Domestic
Correct Answer: d. Domestic
Rationale: A domestic insurer is one incorporated and operating within
the state where it is doing business.
7. Which of the following factors is NOT considered by an underwriter
when determining the premium rates for an individual seeking
insurance?
a. Sex
b. Medical history
c. Race
d. Age
Correct Answer: c. Race
, Rationale: Race is not used because it is discriminatory and lacks sound
statistical basis for determining loss probability. Age, sex, and medical
history are statistically valid.
8. 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
Correct Answer: a. Handling insurer funds in a trust capacity
Rationale: Fiduciary responsibility requires agents to handle insurer and
client funds in a trust capacity, keeping them separate from personal
funds.
9. The authority granted to an agent through the agent's contract is
referred to as:
a. Implied authority
b. Express authority
c. Apparent authority
d. Absolute authority
Correct Answer: b. Express authority
Rationale: Express authority is specifically written into the agent's
contract with the insurer.
10. Insurance policies are not drawn up through negotiations, and an
insured has little to say about its provisions. What contract
