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PSI Life Exam Questions and Answers | Latest Version | 2025/2026 | Correct & Verified
What is a "life insurance policy"?✔✔ A life insurance policy is a contract between an insurer and a policyholder, where the insurer agrees to pay a beneficiary a sum of money upon the death of the insured or after a set period, in exchange for premium payments.
What is the primary purpose of life insurance?✔✔ The primary purpose of life insurance is to provide financial protection to the policyholder’s beneficiaries in the event of the policyholder’s death.
What is "term life insurance"?✔✔ Term life insurance provides coverage for a specified period, and pays a death benefit if the insured dies within that period. It has no cash value.
What is "whole life insurance"?✔✔ Whole life insurance offers lifelong coverage with a savings component, which builds cash value over time that the policyholder can borrow against or withdraw. 1 / 3
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What is "universal life insurance"?✔✔ Universal life insurance is a type of permanent life insurance that combines life coverage with an investment savings element, offering flexibility in premium payments and death benefits.
What is "group life insurance"?✔✔ Group life insurance is a type of insurance policy that covers a group of people, often provided by employers as a benefit to their employees.
What is the difference between "life insurance" and "disability insurance"?✔✔ Life insurance provides financial support to beneficiaries upon the insured's death, while disability insurance offers income replacement if the insured becomes unable to work due to illness or injury.
What is the "beneficiary" in a life insurance policy?✔✔ The beneficiary is the person or entity designated to receive the death benefit of a life insurance policy upon the insured’s death.
What is "cash value" in a life insurance policy? 2 / 3
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✔✔ Cash value is a feature of permanent life insurance policies, where a portion of the premium is set aside to accumulate interest over time, and can be borrowed against or withdrawn.
What is the purpose of the "underwriting" process in life insurance?✔✔ Underwriting is the process in which an insurance company evaluates the risks associated with insuring an individual, determining premiums and coverage based on factors such as health, age, and lifestyle.
What is "premium" in life insurance?✔✔ A premium is the amount paid by the policyholder to the insurer in exchange for life insurance coverage.
What is the "insurable interest" requirement in life insurance?✔✔ Insurable interest requires that the policyholder must have a financial stake in the life of the person being insured, such as a spouse, business partner, or family member.
What does the "contestability period" in a life insurance policy mean?✔✔ The contestability period is a period, typically two years, during which the insurer can investigate and potentially deny a claim for material misstatements or fraud in the application.
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