FREE PSI Exam Questions and Answers

Question 1

Which kind of life insurance has prices based on the insured's current age but can be renewed annually without a needed medical exam?

Accepted Answer

renewable term

Answer

Renewable term life insurance allows policyholders to extend their coverage at the end of the term without needing a new medical exam or proving insurability. While the premiums will increase based on the insured's current age, the guarantee of renewal without re-qualification is a key feature. This provides continuous protection even if the insured's health declines.

Question 2

Generally, speaking, only which of the following types of injuries are covered by short-term disability insurance?

Accepted Answer

Non-work-related injuries

Answer

Short-term disability insurance is designed to provide income replacement for individuals who are temporarily unable to work due to illness or injury. It specifically covers disabilities that are not work-related, as work-related injuries are typically covered by Workers' Compensation insurance. This distinction ensures there is no overlap in coverage for different types of disabilities.

Question 3

Which of the following requires a covered employee to consent to a pay cut so that the money can be used to pay for medical costs?

Accepted Answer

Flexible Spending Account (FSA)

Answer

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows employees to contribute pre-tax money from their paychecks to pay for eligible healthcare expenses. Employees consent to a pay cut (salary reduction) to fund their FSA, which then provides a tax-advantaged way to cover medical costs. Unlike HSAs, FSA funds typically must be used within the plan year.

Question 4

Which of the following criteria must be met by a policy in order to AVOID being labeled as a MEC?

Accepted Answer

7-Pay Test

Answer

The 7-Pay Test is a crucial criterion used to determine if a life insurance policy is classified as a Modified Endowment Contract (MEC). If the cumulative premiums paid into a policy during its first seven years exceed the 'seven-pay limit' (the amount that would have paid up the policy in seven years), it becomes a MEC, which alters its tax treatment for withdrawals and loans.

Question 5

The following choices are all exempt from forfeiture: EXCEPT

Accepted Answer

Cash dividend option

Answer

Nonforfeiture options in life insurance policies protect policyholders by ensuring they receive some value from their policy if they stop paying premiums or surrender it. These options include cash surrender value, reduced paid-up insurance, and extended term insurance. A cash dividend option, however, is a way to receive policy dividends and is not considered a nonforfeiture option that prevents forfeiture of cash value.

PSI - Exams Practice Test

PSI - Exams Practice Test

FREE PSI Exam Questions and Answers