PSI Insurance Exam 3 — Questions and Answers
Question 1: A property insurance concept that prevents an insured from collecting more than the actual financial loss sustained is called the principle of:
- Subrogation
- Indemnity (Correct answer)
- Insurable interest
- Proximate cause
Correct answer: Indemnity
The principle of indemnity states that insurance should restore the insured to the same financial position as before the loss, not better.
Question 2: Which Medicare supplement plan is standardized and covers the Medicare Part A deductible?
- Plan A
- Plan B (Correct answer)
- Plan C
- Plan F
Correct answer: Plan B
Medigap Plan B covers the Medicare Part A hospital deductible in addition to the basic benefits included in all Medigap plans.
Question 3: An insurer that is incorporated in the state where it is doing business is called a:
- Alien insurer
- Foreign insurer
- Domestic insurer (Correct answer)
- Surplus lines insurer
Correct answer: Domestic insurer
A domestic insurer is one that is incorporated and chartered in the same state where it sells insurance.
Question 4: The Workers' Compensation law requires employers to provide benefits for employees injured:
- Only in serious accidents requiring hospitalization
- In the course and scope of employment (Correct answer)
- Only when the employer is at fault
- After a 30-day waiting period
Correct answer: In the course and scope of employment
Workers' compensation is a no-fault system covering injuries arising out of and in the course of employment, regardless of employer negligence.
Question 5: A universal life insurance policy's death benefit option that keeps the face amount level while cash value changes is called:
- Option A (Level death benefit) (Correct answer)
- Option B (Increasing death benefit)
- Option C (Return of premium)
- Option D (Decreasing death benefit)
Correct answer: Option A (Level death benefit)
Under universal life Option A, the total death benefit remains level, so as cash value grows the net amount at risk decreases.
Question 6: Which liability coverage pays for bodily injury or property damage that the insured becomes legally obligated to pay?
- Medical payments coverage
- Uninsured motorist coverage
- Personal liability coverage (Correct answer)
- Physical damage coverage
Correct answer: Personal liability coverage
Personal liability coverage protects the insured against claims arising from their legal responsibility for injury or damage to others.
Question 7: The period between when an insurance application is submitted and when the policy is issued during which temporary coverage may apply is called the:
- Grace period
- Free-look period
- Binding period (Correct answer)
- Elimination period
Correct answer: Binding period
A binding period (or binder) provides temporary coverage from the time the application is accepted until the formal policy is issued.
PSI Insurance Exam 3
A property insurance concept that prevents an insured from collecting more than the actual financial loss sustained is called the principle of: