Primerica Life Insurance License Questions

During a replacement, how long must the existing insurer maintain all notifications sent by the replacing insurer? A) 3 years B) 1 year C) The existing insurer is not required to maintain these records D) 5 years

D) 5 years

Which of the following is owned by a corporation to serve that organization's needs at lower rates than would otherwise be available with commercial insurance? A) Captive insurer B) Internal insurer C) Custom insurer D) Reinsurer

A) Captive insurer

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? A) Implied B)Apparent C)Assumed D) Express

A) Implied

What is the purpose of a conditional receipt? A) It is intended to provide coverage on a date earlier than the date of the issuance of the policy. B) It guarantees the applicant that a policy will be issued in the amount applied for in the application. C) It serves as proof that the agent has determined the applicant to be fully insurable for the coverage by the insurance company. D) It is given by the agent only to applicants who prepay all scheduled premiums in advance of policy issue.

A) It is intended to provide coverage on a date earlier than the date of the issuance of the policy. AN

In insurance, an offer is usually made when: A) The completed application is submitted. B) The insurer approves the application and receives the initial premium C) The agent hands the policy to the policyholder. D) An agent explains a policy to a potential applicant.

A) The completed application is submitted.

A producer who fails to segregate premium monies from his own personal funds is guilty of: A) Theft B) Commingling C) Larceny D) Embezzlement

B) Commingling

The authority granted to an agent through the agent's contract is referred to as: A) Absolute authority B) Express authority C) Apparent authority D) Implied authority

B) Express Authority

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? A) Lump-Sum Approach B) Human Life Value Approach C) Needs Approach D) Blackout Approach

B) Human Life Value Approach

What is the purpose of key person insurance? A) To maintain an account that insures the owner of a company remains solvent. B) To lessen the risk of financial loss because of the death of a key employee. C) To provide health insurance to the families of key employees. D) To insure retirement benefits are available to all key employees.

B) To lessen the risk of financial loss because of the death of a key employee.

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? A) Adhesion B) Conditional C) Aleatory D) Good Health

C) Aleatory

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? A) As of the first of the month after the policy issue. B) As of the policy issue date C) As of the application date D) As of the policy delivery date

C) As of the application date

Who makes up the Medical Information Bureau?

C) Insurers

A situation in which a person can only lose or have no change represents: A) Adverse selection B) Hazard C) Pure risk D) Speculative risk

C) Pure risk

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept? A) Nonforfeiture B) Indemnity C) Reasonable expectations D) Cease and desist

C) Reasonable expectations

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A) Indemnity B) Representation C) Warranty D) Concealment

C) Warranty

Where would the underwriter find relevant information not presented by the applicant but communicated by the producer? A) Statement of Continued Good Health B) Conditional Receipt C) Policy Summary D) Application

D) Application

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 diets. Which method of dealing with risk does this scenario describe? A) Transfer B)Avoidance C) Retention D) Reduction

D)Reduction

Which of the following best describes the aleatory nature of an insurance contract? A) Only one of the parties being legally bound by the contract B) Ambiguities are interpreted in favor of the insured C) Policies are submitted to the insurer on a take-it-or-leave-it basis D) Exchange of unequal values.

D) Exchange of unequal values

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? A) Company is the owner, but the executives pays the premium B) Board of directors is the owner, and the board of directors pays the premium. C) Company is the owner, and the company pays the premium. D) Executive is the owner, and the executive pays the premium.

D) Executive is the owner, and the executive pays the premium .

What type of reinsurance arrangement is negotiated on a case by case basis? A) Treaty B) Automatic C) Ceding D) Facultative

D) Facultative

A life insurance policy has a legal purpose if both of which of the following elements exist? A) Underwriting and reciprocity B) Offer and counteroffer C) Policyowners and named beneficiaries D) Insurable interest and consent

D) Insurable interest and consent

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? A) Waiver B) Utmost Good Faith C) Estoppel D) Material misrepresentation

D) Material misrepresentation

An individuals tendency to be dishonest would be indicative of a: A) Morale hazard B) Pure hazard C) Physical hazard D) Moral Hazard

D) Moral Hazard

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? A) Express B) Implied C) Assumed D) Apparent

D) Apparent

Stanger-originated life insurance policies are in direct opposition to the principle of: A) Insurable interest B) Law of large numbers C) Good faith D) Indemnity.

A) Insurable interest

Which of the following is true regarding a risk retention group? A) It is a liability insurance company owned by its members. B) It provides support for underwriters and is not an insurance company. C) It is a benefit society formed to provide insurance for members of an affiliated lodge. D) It is a company owned by the stockholders that provides nonparticipating policies.

A) It is a liability insurance company owned by its members.

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) Mutual B) Reciprocal C) Nonprofit service organization D) Stock

A) Mutual

Which of the following is usually true of a participating life insurance policy? A) Pays dividends to policyowners B) May be converted to a term life policy C) Pays dividends to stockholders D) Assesses premiums against stockholders

A) Pays dividends to policyowners

What must happen when an individual policy or annuity has been personally delivered to the policyowner? A) The policyowner must sign a delivery receipt. B) The policyowner must pay the annual premium in full C) The producer must go over the policy with the policyowner. D) A notary public must witness the exchange.

A) The policyowner must sign a delivery receipt.

The causes of loss insured against in an insurance policy are known as: A) Perils B) Losses C) Risks D) Hazards

A)Perils

The insurer may suspect that a moral hazard exists if the policyholder: A) Always drives over the speed limit B) Is not honest about his health on an application for insurance C)Is prone to depression D) Is indifferent to activities that may be dangerous

B) Is not honest about his health on an application for insurance.

Which law is the foundation of statistical prediction of loss upon which rates for insurance are calculated? A) Law of Group Evaluation B) Law of Large Numbers C) Law of Masses D) Law of Averages

B) Law of Large Numbers

On a participating insurance policy issued by a mutual insurance company, dividends paid to policy holders are: A) Guaranteed B) Not taxable since the IRS treats them as a return of a portion of the premium paid. C) Paid at a fixed rate every year. D) Taxable as ordinary income.

B) Not taxable since the IRS treats them as a return of a portion of the premium paid.

All of the following are characteristics of group life insurance EXCEPT: A) Certificate holders may convert coverage to an individual policy without evidence of insurability. B) Premiums are determined by the age, sex, and occupation of each individual certificate holder. C) Group life insurance is written as a master policy D) Individuals covered under the policy receive a certificate of insurance.

B) Premiums are determined by the age, sex and occupation of each individual certificate holder.

An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information? A) Sign a waiver that the information will be kept confidential. B) Present the insured with a Disclosure Authorization Notice. C) Receive written permission from the Department of Insurance D) Receive a signed statement from the insured which authorizes the investigation

B) Present the insured with a Disclosure Authorization Notice.

In terms of parties to a contract, which of the following does NOT describe a competent party? A) The person must be mentally competent to understand the contract. B) The person must have at least completed secondary education C) The person must not be under the influence of drugs or alcohol. D) The person must be of legal age.

B) The person must have at least completed secondary education.

If an insured changes his payment plan from monthly to annually, what happens to the total premium? A) Doubles B) Increases C) Decreases D) Stays the same

C) Decreases

Which of the following best describes the MIB? A) It is a member organization that protects insured against insolvent insurers. B) It is a rating organization for health insurance C) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance D) It is a government agency that collects medical information on the insured from the insurance companies.

C) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance

Which of the following best describes gross annual premium? A) Basic insurance rate plus commissions B) Expense premium C) Net premium plus expenses D) Annual loading

C) Net premium plus expenses

Who might receive dividends from a mutual insurer? A) Stockholders B) Agents C) Policyholders D) Subscribers

C) Policyholders

When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT: A) Include a policy summary on the proposed life insurance in the communication with the existing company. B) Obtain from the producer a list of the applicant's life insurance or annuity contracts to be replaced. C) Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. D) Send the existing insurance company a written notice of replacement.

C) Provide a copy of the Important Notice of Regarding Replacement of Life Insurance to the applicant.

Which of the following is NOT a characteristic of an insurable risk? A) The loss must be measurable B) The loss exposure must be large C) The loss must be catastrophic D) The loss must be due to chance.

C) The loss must be catastrophic

AN insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize? A) Nonpayment of premium B) Change of beneficiary C) Viatical settlement D) Estate liquidation

C) Viatical Settlement

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will: A) Pay the policy proceeds up to an established limit. B) Not pay the policy proceeds under any circumstances. C) Automatically pay the policy proceeds D) Pay the policy proceeds only if it would have issued the policy.

D) Pay the policy proceeds only if it would have issued the policy

Which of the following insurance options would be considered a risk-sharing arrangement? A) Stock B) Mutual C) Surplus Lines D) Reciprocal

D) Reciprocal

Which type of insurance is based on mutual agreements among subscribers? A) Mutual insurance B) Limited liability C) Reinsurance D) Reciprocal insurance

D) Reciprocal Insurance

In forming an insurance contract, when does acceptance usually occur? A) When an insurer delivers the policy B) When an insurer receives an application C) When an insured submits an application D) When an insurer's underwriter approves coverage.

D) When an insurer's underwriter approves coverage.